CRISIL upgrades YES Bank's certificates of deposit from 'A2' to 'A2+'

Rating agency CRISIL has upgraded its rating on YES Bank’s certificates of deposit (CD) from ‘A2’ to ‘A2+’ in view of an improvement in the bank’s funding and liquidity profile. This has been possible due to a gradual increase in its deposit base, as well as the sizeable capital it raised recently.
 
The private-sector lender repaid – ahead of the earlier plan – Rs 35,000 crore of the Rs 50,000 crore it had availed of under the Reserve Bank of India’s (RBI’s) special liquidity facility in March 2020. Further, the bank's liquidity coverage ratio (LCR) has improved in recent months.
 
YES Bank's LCR improved to 114.1 per cent as on June 30, 2020, from 37.0 per cent as on March 31. According to the RBI norms, a bank has to maintain a minimum LCR of 80 per cent.
 
As of 9:30 am, the bank’s stock was trading 3.9 per cent higher than its previous close on the BSE, at Rs 15.29 a share.

 
YES Bank's total deposits increased to Rs 1.17 trillion (including CD) as on June 30 from Rs 1.05 trillion as on March 31, CRISIL said in a statement.
 
The ratings continue to be underpinned by the expectation of continued extraordinary systemic support from key stakeholders and State Bank of India’s (SBI’s) sizeable ownership. YES Bank is now an associate entity of SBI after a capital infusion of about Rs 10,000 crore by Indian banks as part of a rescue package hammered out by the RBI.
 
Further, the bank raised Rs 15,000 crore though a follow-on public offer (FPO) in July 2020. This helped it significantly improve its capital position (Pro-forma common equity tier I, or CET1 ratio) to 13.4 per cent in June 2020 from 6.3 per cent in March. The overall capital adequacy ratio (CAR) improved to 20 per cent from 8.5 per cent during the same period.

 
CRISIL said the bank had to demonstrate the ability to control its deposit outflow on a sustained basis, and build a strong retail liabilities franchise. It also needed to demonstrate a stable and sound operating business model with strong compliance and governance framework in the medium term, CRISIL said.
 
“The bank's asset quality is weak and the impact of a shift in business model to focus on granular retail segments and selective working capital loans in the corporate segment will need to be seen over a longer period,” it said.