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Moody's downgrades YES Bank ratings ahead of fund raising plan

The negative outlook primarily reflects the risk of further deterioration in YES Bank's solvency, funding or liquidity, if the bank is unable to recapitalise itself within the next few quarters, says Moody's

twitter-logoBusinessToday.In | December 5, 2019 | Updated 19:29 IST
Moody's downgrades YES Bank ratings ahead of fund raising plan
Moody's has downgraded YES Bank's long-term foreign and local currency bank deposit ratings to B2 from Ba3

Private sector lender YES Bank suffered a huge blow on Thursday as Moody's downgraded YES Bank's long-term ratings due to stressed assets and low loss absorbing buffers which may add pressure to its funding and liquidity. The global rating agency also assigned a negative outlook to the private sector lender.

On YES Bank's fund raising plan, the rating agency said that the bank's claim to have received investor interest to the tune of $2 billion has "significant execution risks around the timing, price and regulatory approvals".

"The rating actions reflect Moody's view that YES Bank's funding and liquidity compares weakly to other rated private sector peers in India, and could come under pressure if the bank cannot strengthen its solvency in the next few quarters," it added.

Moody's has downgraded the bank's long-term foreign and local currency bank deposit ratings to B2 from Ba3, foreign currency senior unsecured MTN program rating to (P)B2 from (P)Ba3, and Baseline Credit Assessment (BCA) and Adjusted BCA to b3 from b1.

"The negative outlook primarily reflects the risk of further deterioration in the bank's solvency, funding or liquidity, if the bank is unable to recapitalise itself within the next few quarters," Moody's said in a report.

Also Read: Yes Bank share tanks nearly 4%, other bank stocks fall too

The downgrade of YES Bank's deposit and senior unsecured program ratings were attributed to the bank's pool of potential stressed assets and low loss absorbing buffers against those assets, which may add pressure to its funding and liquidity, creating additional risks to its standalone credit profile.

Moody's expects YES Bank's common equity tier 1 (CET1) ratio of 8.7 per cent at the end of September 2019 to come under significant pressure unless the bank can raise new capital in the next few quarters.

The agency hopes that the government will strive to maintain systemic stability and help prevent any weakness in the bank's standalone credit profile from significantly affecting depositors and creditors. The support assumption also takes into account the bank's modest, but increased franchise and relative importance to India's banking system, it added.

Given the negative outlook, Moody's is unlikely to upgrade the bank's ratings over the next 12-18 months. It could change the ratings outlook to stable, if YES Bank concludes a material capital raise that strengthens its loss-absorbing buffers, it added.

Meanwhile, YES Bank share price closed Thursday's trade at Rs 62.10 apiece, down 1.51 per cent, on the Bombay Stock Exchange.

Edited by Chitranjan Kumar

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