Moody’s Investors Service has upgraded Yes Bank’s ratings and changed its outlook to positive, reflecting its expectations of a further improvement in the lender’s credit profile due to clean-up of legacy stressed assets and improvements to its capital and profitability.
The rating agency has upgraded Yes Bank’s foreign currency issuer rating and long-term foreign and local currency bank deposit ratings to B2 from B3, it said on Wednesday.
Further, it has also upgraded Yes Bank’s Baseline Credit Assessment (BCA) and Adjusted BCA to B3 from Caa2 and has changed the outlook on the bank’s ratings where applicable to positive from stable.
Liquidity improves
“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 have strengthened depositor and credit confidence in the bank,” it said, adding that the rating action also reflects the fact that 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.
Asset quality remains weak
It, however, noted that the private sector lender’s asset quality remains weak and continues to pose risks to its profitability and capital.
Given the positive outlook, Moody’s could upgrade Yes Bank’s ratings if the bank’s asset quality and/or capital materially improve. However, the agency could downgrade the bank’s ratings and BCA if its capital deteriorates significantly because of a strain on its asset quality, or if its funding and liquidity deteriorate.
Also see: Moody’s upgrades outlook for Indian banking system
For the quarter ended September 30, Yes Bank had reported a 74.3 per cent jump in its standalone net profit to ₹225.5 crore from a year ago.
Gross NPAs was at 14.97 per cent of gross advances as on September 30, 2021 versus 16.9 per cent a year ago.