YES Bank Limited CD rating upgraded to 'CRISIL A2+'

CRISIL has upgraded its rating on the Rs 20,000 crore certificates of deposit (CD) of Yes Bank Limited (Yes Bank) to 'CRISIL A2+' from 'CRISIL A2'. It has reaffirmed its 'CRISIL BBB/Stable' rating on the bank's Tier-II bonds (under Basel III) and infrastructure bonds.

The upgrade in the short term rating reflects improvement in the funding and liquidity profile of the bank, with gradual increase in its deposit base as well as sizeable capital raised recently. With this, Yes Bank has repaid Rs 35,000 crore of the Rs 50,000 crore special liquidity facility availed from the Reserve Bank of India (RBI) in March 2020, which is ahead of the earlier plan. Further, the bank's liquidity coverage ratio (LCR) has improved in recent months.

Yes Bank's total deposits increased to Rs 1.17 lakh crore (including CD) as on June 30, 2020 from Rs 1.05 lakh crore as on March 31, 2020. Further, the bank has raised Rs 15,000 crore though a follow-on public offer (FPO) in July 2020, significantly improving its capital position ' Pro-forma common equity tier I (CET1) ratio and overall capital adequacy ratio (CAR) improved to 13.4% and 20%, respectively, from 6.3% and 8.5%, respectively as on March 31, 2020. The bank's LCR improved to 114.1% as on June 30, 2020 from 37.0% as on March 31, 2020; as against the minimum regulatory requirement of 80%.

The ratings continue to be underpinned by the expectation of continued extraordinary systemic support from key stakeholders and sizeable ownership by the State Bank of India (SBI).

At the same time, the ability of the bank to control deposit outflow on a sustainable basis, build a strong retail liabilities franchise and a stable and sound operating business model with strong compliance and governance framework over the medium term, needs to be demonstrated. Additionally, the bank's asset quality is weak and the impact of the shift in business model to focus on granular retail segments and selective working capital loans in the corporate segment will need to be seen over a longer period. These will be key rating monitorables.

From an industry perspective, the nationwide lockdown, imposed by the Government of India (GoI) to contain the spread of the Covid-19 pandemic, has impacted disbursements and collections of financial institutions. The lockdown has now been extended in containment zones, with re-opening of the prohibited activities in a phased manner in other areas. However, certain states have implemented localised lockdowns. Herein, CRISIL believes that eventual lifting of restrictions will continue to be in a phased manner. Any delay in return to normalcy will put further pressure on collections and asset quality metrics of lenders.

Yes Bank has provided moratorium to its borrowers in line with the relief measures provided by RBI. Any change in behaviour of borrowers on the payment discipline can affect asset quality levels post the moratorium. Also, while the one-time restructuring scheme announced by RBI will aid in providing necessary support to affected borrowers in the current environment, the details and operational implementation of the same will have to be seen.

Shares of YES BANK LTD. was last trading in BSE at Rs.14.71 as compared to the previous close of Rs. 14.67. The total number of shares traded during the day was 20480740 in over 23417 trades.

The stock hit an intraday high of Rs. 14.9 and intraday low of 14.61. The net turnover during the day was Rs. 301396789.

Source : Equity Bulls

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