Yes Bank share price gains 3.5% on Moody’s rating upgrade, stable outlook following Rs 15,000 cr FPO

Yes Bank’s successful equity capital raise of Rs 150 billion (about $2 billion) has bolstered its solvency and is the main driver of the ratings upgrade

Yes Bank share price gained 3.5 per cent to hit day’s high of Rs 12.41 apiece on Tuesday after global rating agency Moody’s Investors Service upgraded the private lender’s ratings following the recent Rs 15,000 crore follow-on public offer. With today’s gain stock price, Yes Bank’s total market capitalisation stood at Rs 30,617.10 crore, at the time of writing. In March this year, Yes Bank hit a 52-week low of Rs 5.55 apiece, since then it has rallied over 123 per cent. Moody’s Investors Service has upgraded the cash-strapped Yes Bank’s long-term foreign-currency issuer rating by two notches to B3 from Caa1. It has also upgraded its 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.

Along with the rating upgrade, Moody’s Investors Service has changed its outlook on Yes Bank’s rating where applicable to stable from positive earlier. “Yes Bank’s successful equity capital raise of Rs 150 billion (about $2 billion) has bolstered its solvency and is the main driver of the ratings upgrade. 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,” Moody’s said in its rating rationale.

At 9.40 AM, Yes Bank shares were trading 2.09 per cent higher at Rs 12.23 apiece, as compared to a 0.30 per cent rise in the benchmark S&P BSE Sensex. Moody’s also said that following the capital increase, Yes bank’s Common Equity Tier 1 ratio will more than double to 13.4 per cent from 6.6 per cent 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 rating agency further highlighted that the private lender will continue to face the risk of a further deterioration in asset quality in light of the ongoing economic disruption caused by the coronavirus outbreak. 

Given the bank’s improved solvency, Moody’s noted that there is further upside potential to Yes Bank’s BCA and ratings over the next 12-18 months. Even as Yes Bank’s deposits base improved, the rating agency expects that it will be challenging for Yes Bank to restore its low-cost current and savings account (CASA) deposits to pre-March 2020 rescue levels. In its note, Moody’s also said that it could downgrade the bank’s ratings and BCA if (i) its capital deteriorates materially because of asset strain and/or (ii) the bank’s funding and liquidity deteriorate and the bank continues to remain dependent on liquidity support from the regulator for a period beyond the next 12-18 months.