YES Bank soars 35% in 3 months; stock at 20-month high on improved outlook

In August, CRISIL upgraded the rating on Tier-II bonds (under Basel III) and Infrastructure Bonds of YES Bank to 'CRISIL A-' from 'CRISIL BBB+' and revised its outlook to 'Positive' from 'Stable'

Shares of YES Bank hit a 20-month high of Rs 18, up 4 per cent on the BSE in Thursday's intra-day trade, on the back of heavy volumes. In the past three months, the stock of the private sector lender has zoomed 35 per cent on improved outlook. Meanwhile, the S&P BSE Sensex has gained 8.4 per cent during the same period.

With today's gains, YES Bank is at its highest level since January 2021. At 01:46 PM, the stock quoted 3 per cent higher at Rs 17.75, as against 0.7 per cent rise in the benchmark Sensex. The average trading volumes at the counter jumped 1.8 times with a combined 252 million equity shares changing hands on the NSE and BSE.

Last month, rating agencies CRISIL and India Ratings and Research (Ind-Ra) upgraded YES Bank's instruments. CRISIL Ratings upgraded the rating on Tier-II bonds (under Basel III) and Infrastructure Bonds to 'CRISIL A-' from 'CRISIL BBB+’ and revised the outlook to 'Positive' from 'Stable'. While, Ind-Ra upgraded YES Bank's long-term issuer rating to 'IND A-' from 'IND BBB' and assigned outlook as 'Stable'.

CRISIL said the rating action reflects the expectation of continued improvement in the performance of the bank, including traction in deposits, better underlying asset quality with realignment of business model and risk management practices, uptick in profitability and strengthening of capital buffers with the proposed capital raise of Rs 8900 crore. The steady improvement in the deposit base of the bank seen since the reconstruction scheme in March 2020 is expected to continue and hold the bank in a good stead, the rating agency said.

On the asset side, the bank has realigned its business model with a focus towards more granular lending, with the share of retail and small and medium enterprises (SME) increasing. Even within the corporate book, the bank is focussing on lower sized exposures that in the past and with a higher proportion of working capital loans, with term lending mainly to better rated corporates. The reported asset quality metrics are also expected to benefit from the proposed transaction with an asset reconstruction company (ARC), wherein the bank will sell the stressed exposures worth Rs 48000 crore, CRISIL said.

Meanwhile, Ind-Ra in its rating rationale said the upgrade factors in the bolstering of capital buffers through proposed equity raise of about Rs 8,900 crore, strengthening of the bank’s liability profile, as reflected in an increase in the proportion of granular retail deposits, step-up of lending across segments, increased share of the non-corporate loan portfolio, and an overall improvement in the operating environment in the Covid-19 aftermath.

YES Bank continues to gain market share on the digital payments side, which has been playing a reasonable role in the bank’s attempts to mobilise current account deposits (CA) and other businesses. Furthermore, with the senior management having become relatively stable through reconstruction, the Reserve Bank of India has pulled its representatives from the bank’s board, and the bank’s reconstruction seems to have been completed, the rating agency said. CLICK HERE FOR MORE DETAILS