YES Bank Limited ratings upgraded to 'CRISIL BBB+ / Stable / CRISIL A1'

CRISIL Ratings has upgraded the rating on Tier-II bonds (under Basel III) and Infrastructure Bonds of Yes Bank Limited (Yes Bank) to 'CRISIL BBB+/Stable' from 'CRISIL BBB/Stable'. CRISIL Ratings has also upgraded the rating on the Rs 20,000 crore certificates of deposit (CD) of the bank to 'CRISIL A1' from 'CRISIL A2+'.

The upgrade in the rating reflects the greater stability in the bank's deposit base in the past few quarters post reconstruction of the bank in March 2020, as well as its adequate capitalisation. Yes Bank's total deposits increased to Rs 1.63 lakh crore as on June 30, 2021 from Rs 1.17 lakh crore as on June 30, 2020 and Rs 1.05 lakh crore as on March 31, 2020. The proportion of, granular and sticky, current account and savings account (CASA) deposits to overall deposits has been on an improving trend and stood at 27.4% as on June 30, 2021 as against 25.8% as on June 30, 2020. Further, the bank's capital position is adequate, supported by the capital raise of Rs 15,000 crore though a follow-on public offer (FPO) in July 2020. The common equity tier I (CET1) ratio and overall capital adequacy ratio (CAR) stood of 11.6% and 17.9%, respectively, as on June 30, 2021. Bank's average liquidity coverage ratio (LCR) also remains adequate at 132% for the quarter ended June 30, 2021, as against the minimum regulatory requirement of 100%.

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 continue to 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 and micro, small and medium enterprises (MSME) 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.

In line with Reserve Bank of India's (RBI's) measures for Covid-19 pandemic, Yes Bank had given moratorium to its borrowers. While the collection efficiency was impacted during the initial months of the moratorium, collections have gradually improved towards pre-Covid levels. However, the second wave of Covid-19 pandemic resulted in intermittent lockdowns and localised restrictions and led to some delays in collections in April-June 2021 due to impact on the underlying borrower cash flows. Further, in CRISIL Ratings' opinion, any change in the behaviour of borrowers on payment discipline may affect delinquency levels.

Asset quality of the bank continues to remain weak with elevated gross non-performing assets (GNPA) levels. Its GNPA stood at 15.6% as on June 30, 2021 and 15.4% as on March 31, 2021. However, the same has come down from 16.8% as on March 31, 2020 primarily driven by write-offs. Elevated GNPAs are driven by the GNPAs in the corporate segment, which had a GNPA of 27.1% as on June 30, 2021 and 26.4% as on March 31, 2020. Further, on account of the impact of the pandemic on the economy, the non-corporate segment has also witnessed an inch up in GNPAs to 3.4% as on June 30, 2021 and 3.0% as on March 31, 2021 from 1.5% as on March 31, 2020.

Under the RBI's August 2020 resolution framework for Covid-19-related stress, as on June 30, 2021, the bank implemented restructuring for 2.0% of its net advances. This is over and above around 1% of net advances restructured under the other restructuring mechanisms such as extension of the date for commencement of commercial operations (DCCO) and restructuring for MSME scheme. Overall restructuring may increase marginally from the current levels under the Resolution Framework 2.0, which has a timeline till September 30, 2021 for invocation.

Given challenges in the macro-environment, ability of the bank to manage collections and asset quality will remain a key monitorable.

Shares of Yes Bank Ltd. was last trading in BSE at Rs. 10.8 as compared to the previous close of Rs. 10.9. The total number of shares traded during the day was 15891579 in over 35907 trades.

The stock hit an intraday high of Rs. 11 and intraday low of 10.75. The net turnover during the day was Rs. 172726679.

Source : Equity Bulls

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