Yes Bank gets Moody’s “yes”

about 2 months ago
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Yesterday night, Moody’s upgraded Yes Bank's long-term foreign currency issuer rating to B3 from Caa1.

It also upgraded:

Long-term foreign and local currency bank deposit ratings to B3 from Caa1

Its foreign currency senior unsecured MTN program rating to (P)B3 from (P)Caa1

Long-term local and foreign currency Counterparty Risk Ratings (CRR) to B3 from Caa1

Long-term Counterparty Risk (CR) Assessment to B3(cr) from Caa1(cr)

Bank's Baseline Credit Assessment (BCA) and Adjusted BCA to caa2 from ca

Moody’s outlook has been changed from positive to stable.

Why this upgrade? Moody’s stated that Yes Bank's successful equity capital raise of Rs.150 billion (about $2 billion) has bolstered its solvency and is the main driver of the ratings upgrade. Moody’s said 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 assumes a high level of government support for Yes Bank, resulting in a two-notch uplift.

The Bank’s liquidity coverage ratio (LCR) has trebled to 114% as of 30 June 2020 from 40% at 31 March 2020. The LCR improvement is partially driven by the liquidity support from the Reserve Bank of India (RBI).

Moody’s warned though that Yes Bank continues to face the risk of a further deterioration in asset quality in light of the ongoing economic disruption caused by the coronavirus outbreak. About 40%-45% of the bank's loans were under a repayment moratorium as of mid-April 2020. Any further deterioration in asset quality will strain the bank's already weak profitability.

Moody's could downgrade the bank's ratings and BCA if: (i) its capital deteriorates materially because of asset strain and/or (ii) the bank's funding and liquidity deteriorate and the bank continues to remain dependent on liquidity support from the regulator for a period beyond the next 12-18 months.

The stock is well ensconced in the green today. From its close yesterday at Rs.11.98, the stock opened today morning at Rs.12.30 and rose to an intraday high at Rs.12.41, not too far from its 5% UC of the day at Rs.12.57.

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