Mumbai: Global ratings agency
Investors Service on Wednesday downgraded Yes Bank’s creditworthiness deeper into ‘junk’ status, citing concerns over lowerthan-expected capital raising recently, and the lender’s ability to raise more funds in the future.
“The downgrade of Yes Bank’s ratings takes into account lowerthan-expected amount of capital raised by the bank, and the risk that the substantial decline in the bank’s share price will challenge its ability to raise sufficient capital to maintain the rating at its previous level,” Moody’s said in a statement.
had recently raised Rs 1,930 crore via qualified institutional placement (QIP).
Long-term foreign and local-currency bank deposit ratings were downgraded to Ba3 from Ba1, with a ‘negative’ outlook.
Moody’s also said that given the ‘negative’ outlook, an upgrade is unlikely in the next 12-18 months.
slumped more than 7 per cent to end at Rs 59.5 apiece. Yes Bank has declined 68 per cent this year, and its market cap has shrunk Rs 26,000 crore.
also announced that its board of directors will meet on August 30 to approve a proposal to raise more funds. Analysts estimate that while the latest fundraising will improve its capital ratios by 60 bps, it would need further growth capital of up to Rs 4,000 crore to underpin credit expansion.
Yes Bank’s dollar bonds due 2023 slumped 3.2 cents to the dollar to 86.4 cents after Moody’s cut their outlook, logging their biggest decline in nine months, Bloomberg data showed. Moody’s expects the bulk of Yes Bank’s operating profits will get consumed by loan loss provisions over the next 12-18 months. With little internal capital generation, the bank will be dependent on external funds to improve its loss-absorbing buffers, which in Moody’s opinion is becoming more challenging given the substantial decline in its share price.
Yes Bank’s asset quality deteriorated in the quarter ended June, with gross non-performing loan ratios rising to 5 per cent from 3.2 per cent at the end of March 2019. About Rs 7,500 crore of bond investments, or 10 per cent of the lender’s total investment holdings, have experienced rating downgrades recently. As of June 2019, the bank’s loan loss coverage against potential stressed loans, bad loans and watch-list loans was about 27 per cent, a threshold considered very weak, given the default rate in the Indian banking system.
“Although the bank’s funding and liquidity profile has remained broadly stable, it compares weakly to other rated private sector peers in India,” Moody’s noted. “The negative outlook primarily reflects the risk of further deterioration in the bank’s solvency, funding or liquidity, as the bank continues to work through the asset quality issues and rebuilds its loss-absorbing buffers.”