Yes Bank slips after rating downgrades

Yes Bank fell 2.46% to Rs 45.60 after various credit rating agencies downgraded their ratings on the bank.

India Ratings and Research (Ind-Ra) on Wednesday downgraded Yes Bank's long-term issuer rating to 'IND A' from 'IND A+' and its short-term issuer rating to 'IND A1' from 'IND A1+'. The agency has simultaneously placed the ratings on rating watch negative (RWN). The outlook on the earlier rating was negative.

The downgrade reflects the inadequate progress as per Ind-Ra's expectations with respect to the quantum and pace of equity infusions, which is critical for providing sufficient cushion for the credit cost impact of the stressed asset pool. Although the liquidity position of the bank seemed adequate at end-September 2019, Ind-Ra believes that, in the absence of improvements on the capital side, the ability of the bank to manage its asset and liability maturities might be tested further.

In Ind-Ra's opinion, the bank is likely to face balance sheet expansion challenges over the short-to-medium term as it implements new strategies, and it will also have to continue to deal with the overhang of stressed assets and resultant credit costs.

Further, credit rating agency, ICRA, downgraded Yes Bank's Basel III compliant Tier II bond programme, Basel II compliant Lower Tier II bond programme and the infrastructure bond programme to [ICRA] A (negative) from [ICRA] A+ (negative).

It has also downgraded Basel II compliant upper Tier II bond programme and Basel II compliant Tier I bond programme to [ICRA] A- (negative) from [ICRA] A (negative). It has also downgraded Yes Bank's short-term fixed deposit programme and certificates of deposit programme to [ICRA] A1 from [ICRA] A1+.

The rating downgrade considers the continued uncertainty regarding the timing and quantum of capital raise by Yes Bank Limited (YBL). The level of investor interest amid the correction in the stock price and the receipt of regulatory approvals also remain key monitorables.

ICRA will continue to monitor the capital raising, liquidity/funding profile and asset quality position of the bank. Continued weakening of these parameters will remain negative rating triggers. Conversely, a sizeable capital raise by the bank leading to improved solvency, stability, deposit base and asset quality will be a positive rating trigger.

Yes Bank reported a net loss of Rs 600.08 crore in Q2 September 2019 as compared to net profit of Rs 964.70 crore in Q2 September 2018. The total income of the bank fell 4.3% to Rs 8,332.21 crore in Q2 September 2019 over Q2 September 2018.

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