Moody’s downgrades Yes Bank ratings

Global rating agency Moody’s on Thursday downgraded Yes Bank’s long term foreign currency issuer rating to B2 from Ba3 and assigned a negative outlook on concerns of stressed assets and capital adequacy.

“Moody's has also downgraded the bank's long-term foreign and local currency bank deposit ratings to B2 from Ba3, foreign currency senior unsecured MTN program rating to (P)B2 from (P)Ba3, and Baseline Credit Assessment (BCA) and Adjusted BCA to b3 from b1,”it said in a statement, adding that the outlook on the bank's ratings, where applicable, is negative.

“Given the negative outlook, Moody's is unlikely to upgrade the bank's ratings over the next 12 to 18 months,”it said.

The downgrade, which stems from rating action initiated on November 6, comes less than a week after the board of the private sector lender approved capital raising plans of $ 2 billion.

Also read: Yes Bank Board to raise $2 billion through preferential allotment of shares

The rating agency expects that the bank’s pool of potential stressed assets and low loss absorbing buffers against those assets — will add pressure to its funding and liquidity, creating additional risks to its standalone credit profile or BCA, it said.

It also estimates that the lender’s common equity tier 1 (CET1) ratio of 8.7 per cent at the end of September 2019 could come under significant pressure, unless the bank can raise new capital in the next few quarters.

While noting the capital raising plans, it said that there are “significant execution risks around the timing, price and regulatory approvals required”.

Moody's also maintained a negative adjustment for corporate behavior in Yes Bank's BCA. “The corporate behaviour adjustment reflects the RBI's identification of several lapses and regulatory breaches in various areas of the bank's functioning in fiscal 2018,”it said, adding that it includes the divergence in asset quality.