Shares of private sector lender Yes bank surged as much as 3 per cent intra-day on Wednesday after global rating agency Moody's changed the outlook on the bank to stable.
Moody's Investors Service (Moody's) has affirmed Yes Bank foreign currency issuer rating of 'Ba1'. It has also changed the outlook to 'stable' from 'negative'.
Boosted by the development, shares of Yes Bank gained as much as 3.45 per cent to hit an intra-day high of Rs 219.80, before closing at 217.90 levels, up 2.57 per cent, on the Bombay Stock Exchange.
In a similar fashion, stocks of country's fourth largest private lender rose 1.93 per cent to close at Rs 216.95 on the National Stock Exchange.
Moody's has also affirmed the bank's foreign and local currency bank deposit ratings of Ba1/NP, foreign currency senior unsecured MTN program rating of (P)Ba1, and Baseline Credit Assessment (BCA) and adjusted BCA of ba2.
The agency said that rating action takes into account recent developments including, the results of the Reserve Bank of India's risk assessment and bank's stable financial performance. Based on this, the agency has assessed that the downside risks to the bank's credit profile have diminished, it said.
On February 13, 2019, Yes Bank announced that the RBI observed no divergence in the bank's asset classification and provisioning. By contrast, in the two fiscal years ended March 2017 and 2016, there was significant divergence in the bank's reported asset quality metrics when compared with the RBI's assessment of asset quality.
In late-January 2019, the bank appointed, Ravneet Gill as its MD and CEO, and completed the leadership transition from the bank's founder and long-time MD and CEO, Rana Kapoor. The leadership transition was at the directive of the RBI in September 2018 to restrict Kapoor's term until 31 January 2019.For the December quarter, the bank reported a 6.96 per cent decline in its net profit at Rs 1,001.85 crore, compared to Rs 1,076.87 crore in the corresponding quarter of 2017-18. The bank's net interest income grew 41.2 per cent year-on-year to Rs 2,666.4 crore.
"The bank's financial performance, including its asset quality, profitability and funding and liquidity position remain stable. Furthermore, its asset quality metrics and profitability are better than similarly rated Indian banks," Moody's said.
However, Yes Bank's high loan concentration to corporate groups increases the risk of volatility in the asset performance, it added.
Edited by Chitranjan Kumar