Moody's upgrades YES Bank to B3 on equity infusion; outlook stable

Successful equity raising showcases lender's regained access to external market funds, which is a result of its improving financial strength, the agency says

Moody's has upgraded YES Bank’s long-term foreign currency issuer rating from “Caa1” to “B3”  as equity capital raise of Rs 15,000 crore has bolstered its solvency.

Moody's has also upgraded the bank's long-term foreign and local currency bank deposit ratings to B3 from Caa1, and foreign currency senior unsecured MTN programme rating to (P)B3 from (P)Caa1.

The outlook on Yes Bank's ratings, where applicable, has been changed to stable from positive, the rating agency said in a statement.

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.

Following the capital increase, the bank's Common Equity Tier-1 ratio will more than double to 13.4 per cent from 6.6 per cent, based on its capital position at the end of June 2020. The capital raise brings capitalisation largely in line with its private sector peers. The significantly improved solvency ratio strengthens the bank's resilience to potential asset quality risks resulting from the ongoing impact of the economic slowdown and coronavirus-related disruptions on India's economy.

YES Bank's funding and liquidity have moderately improved in the second quarter of 2020, although they are still weaker than a year ago. 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 per cent 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, it added.