Moody's upgrades Yes Bank following ₹15,000-cr capital raise; outlook stable
2 min read . Updated: 03 Aug 2020, 08:21 PM IST'The outlook on Yes Bank's ratings where applicable is changed to stable from positive,' said Moody’s
Home >Industry >Banking >Moody's upgrades Yes Bank following ₹15,000-cr capital raise; outlook stable
Rating agency Moody’s on Monday upgraded private sector lender Yes Bank’s long-term foreign currency issuer rating by one notch from Caa1 to B3, citing the bank’s recent success in raising capital.
“The outlook on Yes Bank's ratings where applicable is changed to stable from positive," said Moody’s. The bank recently raised ₹15,000 crore bolstering its capital adequacy ratios.
It also upgraded the bank's long-term foreign and local currency bank deposit ratings to B3 from Caa1, and its foreign currency senior unsecured MTN program rating to (P)B3 from (P)Caa1.
In addition, Moody's has also upgraded the bank's long-term local and foreign currency Counterparty Risk Ratings (CRR) and long-term Counterparty Risk (CR) Assessment to B3 from Caa1 and B3(cr) from Caa1(cr), respectively.
“The successful equity raising showcases Yes Bank's regained access to external market funds, which is a result of its improving financial strength and will support depositor confidence," it said.
Following the capital raise, Yes Bank common equity tier 1 (CET 1) ratio will more than double to 13.4% from 6.6% based on the bank's capital position at the end of June 2020, bringing its capitalization largely in line with its private sector peers.
The significantly improved solvency ratio, Moody’s said, strengthens the bank's resilience to potential asset quality risks resulting from the ongoing impact of the economic slowdown and coronavirus-related disruptions on India's economy.
According to Moody’s, Yes Bank's funding and liquidity have moderately improved in the second quarter of 2020, although they are still weaker than a year ago.
“Deposits, including current, savings and term deposits, increased 11% during March and June 2020, but remain 48% less than the same period last year. The deposit growth was largely driven by current account, corporate term deposits and certificate of deposits," it said.
Meanwhile, Moody also said that there is further upside potential to Yes Bank's ratings over the next 12-18 months. Similar to other banks that undergo a restructuring, Moody's expects that any improvement in the baseline credit assessment (BCA) will be gradual depending on the bank's ability to restore its franchise strength, improve its funding and maintain its stable solvency.
Yes Bank reported a net profit of ₹45.44 crore in the three months to June 2020, down 60% year-on-year (y-o-y) led by sharp drop in total income. Led by a 30% y-o-y decline in interest earned during the quarter, the bank’s total income fell 33% to ₹6,107 crore. Its other income fell 51% to ₹621 crore for the quarter under review.
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