Moody's Investors Service has upgraded Yes Bank Limited's long-term foreign-currency issuer rating and long-term foreign and local currency bank deposit ratings to B2 from B3.
The rating upgrade comes after a cleanup drive of legacy stressed assets and improvements to Yes Bank's capital and profitability. Moody's has also upgraded Yes Bank's Baseline Credit Assessment (BCA) and Adjusted BCA to b3 from caa2.
Moody's has also changed the outlook on Yes Bank's ratings to "positive" from "stable", expecting a further improvement to the bank's credit profile.
"Moody's has upgraded Yes Bank's issuer rating to B2 from B3 because its funding and liquidity have substantially improved in the past year, which has strengthened depositor and credit confidence in the bank," said the latest Moody's report.
As per Moody's, despite the significant economic challenges since the onset of the pandemic, Yes Bank's asset quality has deteriorated only “modestly” while its capital has remained “stable”.
The improved financials metrics are reflected in the two-notch upgrade of the bank's BCA to b3 from caa2. Moody's has also lowered government support assumption for Yes Bank to "moderate" from "high".
The Moody’s report said Yes Bank's deposits have increased over 65 per cent between September 30 2021 and March 31 2020, after Indian regulators rescued the bank. Its deposit quality has also improved; current and savings account and retail term deposits represent 45 per cent of total funding as of September 30 2021, compared with just 31 per cent as of March 31 2020.
Concurrently, the bank has reduced its share of market funding, while its average liquidity coverage ratio (LCR) improved to 118 per cent as of 30 September 2021 from 40 per cent as of March 31 2020.
Despite these positive aspects, Yes Bank's asset quality still remains weak and continues to pose risks to its profitability and capital. "While its reported non-performing loan (NPL) ratio declined moderately to 15 per cent as of September 30 2021 from 17 per cent as of March 31 2020, the bank's off-balance sheet exposures to NPLs, restructured loans and loans overdue for more than 60 days, which represent 5.5 per cent of total loans as of September 30 2021, pose risks," said Moody's.
The Yes Bank stock closed at Rs 13, Rs 0.10 or 0.76 per cent down, compared to the previous day close of Rs 13.1 on the NSE.
Copyright©2022 Living Media India Limited. For reprint rights: Syndications Today