Shares of private sector lender YES Bank fell in early trade today after ratings agency ICRA downgraded its long-term ratings along with negative outlook, citing a spike in its lower-rated advances and falling core capital buffers.
YES Bank opened at a loss of 3.47 per cent and later tumbled to the day's low of Rs 167.30, down 4.73 per cent on BSE.
The agency has downgraded the ratings on its six instruments totalling borrowings over Rs 33,000 crore by the lender, after it had last week reported a surge in BB and below-rated advances in the March quarter to 7.1 per cent under a new chief executive Ravneet Gill, Icra said.
"With a sizable increase in the share of BB and below-rated advances and the weakened capital cushions, rating outlook remains negative," Icra said. The bank had also reported its maiden loss of over Rs 1,506 crore in the March quarter, driven by a near ten-fold spike in provisions.
The rating action comes after the agency placed the ratings under watch with negative implications last November, after the Reserve Bank refused to let YES Bank's promoter chief executive Rana Kapoor to continue beyond January 31, citing corporate governance and other concerns, which ultimately led to Gill's appointment in March.
The agency said the rating action also factors in a further weakening of its core equity capital cushions because of the voluntary provisions and the Rs 1,506-crore loss in the March quarter.
"The ability to reduce low-rated advances and improve the CET-I capital cushion along with diversifying the advances and liabilities will result in a change in the outlook to stable from negative," it added.
The bank has set aside a large sum of Rs 2,100 crore as contingent provisions for this exposure and also guided towards an elevated capital cost of 1.25 per cent in FY20, the agency said.
Icra has also factored in further weakening in core equity capital cushion, due to consequent losses and voluntary provisions in the March quarter. The agency has lowered the banks' tier-I bond from "AA-" to "A" and tier-II bonds from "AA" to "AA-".
Since the earnings announcement, the bank's shares have lost over 35 per cent of value, with a 30 per cent fall on the very next day of trade.
The high beta stock is trading below 30, 50 ,150 as well as 200 day SMA on both trading platforms. The stock has fallen after 2 days of consecutive gain. Shares of Yes Bank closed 1.04 per cent up at Rs 175.60 apiece on the BSE.
YES Bank stock has fallen over 50 per cent during the last one year, 18 per cent in the last 6 months, over 37 per cent in one month and around 28 per cent in the last week.
At 10:30 am, the stock was trading at Rs 170, down by 5 points or 3.25 per cent.
According to data available with the exchanges, there was surge in volume trade with 12.16 lakh shares and 155.6 lakh shares changing hands on BSE and NSE, respectively.
In a separate development related to the private bank, RBI has imposed a penalty of Rs 11.25 lakh on the private lender for violating money transfer norms.
Reserve Bank of India (RBI) vide its speaking order dates April 22, 2019, imposed a penalty of Rs 11,25,000 under the Payment and Settlement Systems Act, 2007,' Yes bank said in a regulatory filing on May, 3.
RBI has identified certain violations of RBI Circular dated October 05, 2011 on Domestic Money Transfer - Relaxations and Master Direction dated October 11, 2017 on Issuance and Operation of Prepaid Payment Instruments (PPis) in connection with certain product features of an open loop prepaid card (co-branded) previously issued by the Bank.
"The Bank had launched this product as pilot program from September 13, 2017 and later discontinued this product with effect from March 14, 2018," the statement read.
(Edited by Rupa Burman Roy)