“Crisil has assigned its 'CRISIL BBB/Stable' rating to the tier II bonds (under Basel III) of Rs 13,941 crore and infrastructure bonds of Rs 3,780 crore of YES Bank, and has reaffirmed its 'CRISIL A2' rating on certificates of deposit. The ratings are underpinned by the expectation of continued extraordinary systemic support from key stakeholders and sizeable ownership by State Bank of India (SBI),” the rating agency said in rating rationale.
However, the bank's ability to limit further deposit outflow, and to build a strong retail liabilities franchise and a stable and sound operating business model with strong compliance and governance framework over the medium term needs to be demonstrated, it said.
Additionally, the bank's asset quality is weak and the impact of the shift in business model to focus on granular retail segments will need to be seen over a longer period. These will be key rating monitorables.
The rating agency further said the lockdown and restrictions are now being lifted in phases. Any delay in return to normalcy will increase pressure on collections and hence asset quality. The bank has also offered a moratorium to borrowers and its collections are, hence, expected to be low in the near term.
Additionally, any change in payment discipline of borrowers can affect delinquency levels post the moratorium. Given this, gross non-performing assets (NPAs) could rise due to weakening in most sectors. This may increase the credit cost in fiscal 2021, thereby impacting the profitability of the bank, and will be a key monitorable, it said.
In the past one month, YES Bank underperformed the market by gaining 8 per cent, as compared to 9 per cent rise in the S&P BSE Sensex till Friday. At 11:03 am, the stock was trading 8.5 per cent higher at Rs 31.25 on the BSE, against 1.5 per cent rise in the benchmark index. The trading volumes on the counter nearly doubled with a combined 26.7 million equity shares changing hands on the NSE and BSE so far.