Ind-Ra maintains Yes Bank on rating watch negative

Private sector lender Yes Bank said on Wednesday that India Ratings and Research (Ind-Ra) has maintained its long-term issuer rating of A on rating watch negative (RWN) and withdrawn its short-term issuer rating of A1.

Ind-Ra continues to await developments on Yes Bank's equity raising which in the agency's opinion is critical for providing sufficient cushion to the possible credit cost impact from the stressed asset pool on regulatory capital requirement in the short- and medium-term.

This rating action is a follow up of the rating rationale published by the agency on December 18 last year where Ind-Ra had stated that the rating will be reviewed in January 2020. The agency has withdrawn the bank's short-term rating since there is no outstanding against the same.

Although the liquidity position of the bank seemed adequate at September-end (liquidity coverage ratio of 114 per cent), Ind-Ra said that in the absence of any swift capital raise, the bank's ability to manage its asset and liability maturities could get tested further.

The bank continues to remain in discussions with various potential investors. However, Ind-Ra believes raising sizeable capital in the near term could be challenging and require various regulatory and other approvals. The rating will be reviewed again next month.

For rating AT1 instruments, Ind-Ra considers the discretionary component, coupon omission risk, and write-down or conversion risk as the key parameters.

The agency has recognised the unique going-concern loss-absorption features of these bonds and differentiated them from the bank's senior debt (by two notches in this case).

Ind-Ra envisages coupon deferrals and principal write-down risk as a modest possibility in view of Yes Bank's revenue reserve buffers.

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