In some reprieve to troubled private sector lender YES Bank, global rating agency Moody’s upgraded its ratings to B3 and gave it a stable outlook after its successful Further Public Offering (FPO).

“YES Bank’s successful equity capital raise of ₹15,000 crore has bolstered its solvency and is the main driver of the ratings upgrade. The successful equity raising showcases YES Bank’s regained access to external market funds, which is a result of its improving financial strength and will support depositor confidence,” Moody’s said in a statement on Monday.

It has also upgraded the bank's long-term foreign and local currency bank deposit ratings to B3 from Caa1, and its foreign currency senior unsecured MTN program rating to (P)B3 from (P)Caa1.

Additionally, the agency has upgraded the lender’s long-term local and foreign currency Counterparty Risk Ratings (CRR) and long-term Counterparty Risk (CR) Assessment to B3 from Caa1 and B3(cr) from Caa1(cr) respectively.

The outlook on YES Bank’s ratings is changed to stable from positive, Moody’s said.

The rating agency however, noted that YES Bank continues to face the risk of a further deterioration in asset quality due to the ongoing economic disruption caused by the coronavirus outbreak.

Noting that nearly 40 per cent to 45 per cent of the bank’s loans were under a repayment moratorium as of mid-April 2020, Moody’s said, “Any further deterioration in asset quality will strain the bank's already weak profitability.”

It further said given its improved solvency, there is further upside potential to Yes Bank’s BCA and ratings over the next 12-18 months.

Moody’s also warned that it could downgrade the lender’s ratings and BCA if its capital deteriorates materially because of asset strain or its funding and liquidity deteriorate and it has to depend on liquidity support from the Reserve Bank of India for a period beyond the next 12-18 months.

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