Brickwork Ratings upgrades ratig of YES Bank Ltd

Brickwork Ratings (BWR) upgrades the rating of Tier I Subordinated Perpetual Bonds (Basel II) to BWR BB+/ Stable from BWR D of Yes Bank Limited (YBL or the bank). The rating upgrade factors in improvement in capitalisation ratios of the bank, strong shareholder base and experienced board members.

In March 2020 RBI had superseded the Board of Directors of the bank and imposed a moratorium for a period of 30 days from 5 March 2020. The RBI also appointed Mr. Prashant Kumar (former Deputy Managing Director and Chief Financial Officer of State Bank of India) as the Administrator and published a draft scheme for reconstruction for the Bank. GOI approved the 'Yes Bank Reconstruction scheme, 2020' and the scheme came into effect from 13 March 2020. As per the scheme of reconstruction, the moratorium was lifted on 18 March 2020. State Bank of India (SBI) and a few domestic private sector financial institutions invested Rs.10,000 Crs in the bank as a part of restructuring and to bolster the bank's capital ratios, which had weakened significantly following the large loss in Q3 FY20 on account of higher provisions. The common equity Tier I (CET-I) and total capital adequacy ratio (CAR) had fallen to 0.6% and 4.1% respectively as on 31 December 2019. The capital infusion and write-down of additional Tier I bonds helped to improve the bank's CET I and CAR ratio to 6.3% and 8.5% respectively as on 31 March 2020, however, the same was below the regulatory requirements.

The bank has further raised Rs 15000 Crs through follow-on public offer (FPO) in July 2020 which has helped the bank to improve its capital ratios. CET I, Tier I and CAR ratios stood at 13.5%, 13.6% and 19.9% respectively as on 30 September 2020. The bank has a strong shareholder base with State Bank of India holding 30% stake as on 30 September 2020 and the bank has an experienced board of directors with Mr. Prashant Kumar as the managing director and chief executive officer (MD & CEO).

The rating is however constrained by the weak asset quality, impacting the profitability and moderate resource profile of the bank. The gross non-performing assets (NPAs) and net NPAs stood at 16.9% and 4.7% respectively as on 30 September 2020. The ability of the bank to control slippages on account of COVID-19 related stress is a key monitorable. The bank had seen a sizable decline in deposits with total deposits reducing from Rs 227610 Crs as on 31 March 2019 to Rs 105364 Crs as on 31 March 2020. However, the bank has been able to increase its deposits during H1 FY21 and total deposits stood at Rs 135815 Crs as on 30 September 2020. The ability of the bank to maintain a retail and sustainable deposit base is a key monitorable.

Shares of YES BANK LTD. was last trading in BSE at Rs.17.33 as compared to the previous close of Rs. 15.76. The total number of shares traded during the day was 123596688 in over 106857 trades.

The stock hit an intraday high of Rs. 17.33 and intraday low of 15.98. The net turnover during the day was Rs. 2107534838.

Source : Equity Bulls

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