Crisil, India Rating upgrade YES Bank's bonds on improved liquidity

Crisil and India Ratings (Ind-Ra) have upgraded infrastructure bonds and other papers of Yes Bank due to its improved liquidity and capital raised recently.

Crisil upgraded its rating on Rs 20,000 crore certificates of deposit of Yes Bank to A2-plus from A2 besides reaffirmed its BBB/Stable rating on the bank's tier two bonds under Basel III and infrastructure bonds.

"The upgrade in short term rating reflects an improvement in funding and liquidity profile of the bank with a gradual increase in its deposit base as well as sizeable capital raised recently," it said.

With this, Yes Bank has repaid Rs 35,000 crore of the Rs 50,000 crore special liquidity facility availed from the Reserve Bank of India (RBI) in March which is ahead of the earlier plan. Further, the bank's liquidity coverage ratio (LCR) has improved in recent months.

Yes Bank's total deposits increased to Rs 1.17 lakh crore as on June 30 from Rs 1.05 lakh crore as on March 31. Further, the bank has raised Rs 15,000 crore through a follow-on public offer in July, significantly improving its capital position.

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), said Crisil.

Meanwhile, Ind-Ra upgraded Yes Bank's long-term issuer rating to BBB from BB-minus while resolving the rating watch evolving. The outlook is stable.

Ind-Ra said the multi-notch upgrade and the resolution of rating watch evolving reflect a significant improvement in Yes Bank's profile and operating metrics post its reconstruction in March.

The upgrade factors in the bank's substantial equity raise, reduced concerns on immediate liquidity position as its funding profile moves towards stability, a strengthened board and limited incremental credit costs from identified delinquent assets as the bank has ramped up its provision cover.

Ind-Ra expects the bank to continue improving its operating metrics and liability profile over the next few quarters as it continues making provisions for Covid-19 related impact on its portfolio.

The agency believes it is critical for the bank to rebuild its loans and deposit franchise as well as trust in the bank and its management to recover the bank's franchise.