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Moody’s Investor Service, on Wednesday, affirmed YES Bank’s ratings and changed the outlook to ‘stable’ from ‘negative’ after the recent developments at the private sector lender, including the appointment of a new Managing Director and CEO and nil divergences report from the RBI.
“Moody’s Investors Service has affirmed YES Bank’s foreign currency issuer rating of Ba1.
Moody’s has also affirmed the bank’s foreign and local currency bank deposit ratings of Ba1/NP, foreign currency senior unsecured MTN programme rating of (P)Ba1, and Baseline Credit Assessment (BCA) and adjusted BCA of ba2,” it said in a statement.
The rating action is based on recent developments, including the results of the RBI’s risk assessment report and YES Bank’s stable financial performance, it further said, adding that the lender’s financial performance, including its asset quality, profitability, and funding and liquidity position, remain stable.
Moody’s had, in November last year, downgraded YES Bank’s ratings and changed the outlook to negative citing concerns over corporate governance and impact of the change in its top leadership as then Managing Director and CEO Rana Kapoor was asked to step down by the RBI.
The rating agency, however, said that it continues to maintain a negative adjustment for corporate behaviour in the bank’s standalone credit profile or BCA.
“Although YES Bank’s reported credit fundamentals remain stable, the bank’s aggressive growth strategy poses risks to its financial performance,” it said, noting that the RBI report highlighted “several other lapses and regulatory breaches in various areas of the bank’s functioning”.
The rating agency further said it is unlikely to upgrade the bank’s ratings during the outlook horizon of the next 12-18 months. However, it could change the ratings outlook to positive if YES Bank maintains its current asset-quality profile, strengthens its loss-absorbing buffers by bringing its capital ratios in line with similarly-rated banks and strengthens its loan-loss reserves, and also reduces concentration risk on the asset side and further improves its liability profile.
Moody’s said the rating could be downgraded if there is a continued deterioration in impaired loans, or if the rate of new bad loans rises or if the bank’s capital ratios decline due to its inability to raise fresh capital. Following the news, the YES Bank scrip gained 2.57 per cent on the BSE and closed at ₹217.90 apiece.
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