With Yes Bank shares losing over 20 per cent in the last two days intra day and hitting a fresh 52 week low of 147 in trade today, investors seem to have lost confidence in the large cap stock. The stock has witnessed sharp sell-off this week too amid reports of rating downgrade and promoter feud.
Here are five reasons why Yes Bank shares have seen a selling spree.
Global rating agency Moody's Investors Service on Tuesday downgraded the lender's foreign currency issuer rating to Ba1 from Baa3 and local currency bank deposit ratings to Ba1/NP from Baa3/Prime-3, citing concerns over the transition in leadership as well as the governance issues. And, Moody's has downgraded Yes Bank's baseline credit assessment (BCA) and adjusted BCA to ba2 from ba1.
A day after Moody's, ratings agencies ICRA and CARE downgraded their ratings for the private lender citing concerns over poor corporate governance. Moody's domestic arm, ICRA has lowered the domestic long term ratings of Senior Debt Instruments to ICRA AA from ICRA AA+ and Subordinate Debt Instruments to ICRA AA- from ICRA AA. The ratings remain on watch with negative implications. CARE has downgraded the domestic ratings of Senior Debt Instruments to CARE AA +from CARE AAA and Subordinate Debt Instruments to CARE AA from CARE AA+.
Reports of Promoter Feud
Stock performance was also affected by media reports which stated that its promoter firms, YES Capital (India) Pvt Ltd and Morgan Credits Pvt Ltd, routed debt money as equity into private finance companies. Responding to media reports, Yes Bank, the country's fourth largest private sector lender, clarified that it is not involved in any way whatsoever with the funds management of two companies referred in media articles and the Bank has no dealings with these two companies except to the extent that Yes Capital (India) Private Limited and Morgan Credits Private Limited, being promoter group entities.
Uncertainty over top management
The bank had been facing turbulence since September after the Reserve Bank of India (RBI) curtailed the term of its managing director (MD) and chief executive officer (CEO) Rana Kapoor till 31 January 2019, and directed the lender to search for a successor in the interim. Following this, the bank was rocked by a series of resignations, starting with its non-executive chairman Ashok Chawla, which was succeeded by three other non-executive directors with R Chandrashekhar being the last one.
Allegations of window dressing to hide bad loans
The National Stock Exchange has sought clarification from the bank if it had indulged in window dressing to hide non-performing assets (NPAs) in response to which the lender has said that it has not entered into any transactions with the intent to do any window dressing of corporate accounts to conceal NPA status. The bank had posted gross NPA of 1.31 per cent and net NPA of 0.59 per cent during the first quarter ended June 30, 2018.
Muted Q2 results
Yes Bank, the country's fourth largest private sector lender, has reported a 3.8 per cent year-on-year decline in net profit to Rs 964.7 crore in the September quarter, compared to Rs 1,002.7 crore in the same period last year, due to higher provisions. The bank absorbed one-time hit of Rs 252 crore as mark-to-market (MTM) provisioning, predominantly on Corporate Bonds. The private sector lender's asset quality also deteriorated during the quarter with Gross non-performing assets (as a percentage gross advances) rising to 1.60 per cent against 1.31 per cent in the June quarter. Net NPA too increased to 0.84 per cent compared with 0.59 per cent in the previous quarter.