Yes Bank spurts after Moody's upgrades ratings; outlook changed to positive

Yes Bank surged 54.99% to Rs 57.50 after credit ratings agency, Moody's on Monday upgraded its ratings with a positive outlook.

Moody's Investors Service (Moody's) has on Monday (16 March 2020) upgraded Yes Bank's long-term foreign currency issuer and foreign currency senior unsecured MTN program ratings to Caa1 from Caa3 and (P)Caa1 from (P)Caa3 respectively.

In addition, Moody's has confirmed the bank's long-term foreign and local currency bank deposit ratings at Caa1. Moody's has also confirmed the bank's long-term domestic and foreign currency Counterparty Risk Rating (CRR) and long-term Counterparty Risk Assessment (CR Assessment) at Caa1 and Caa1(cr) respectively.

Lastly, Moody's has affirmed Yes Bank's Baseline Credit Assessment (BCA) and adjusted BCA at ca.

The rating outlook is positive. The rating action concludes the review with direction uncertain that was initiated on Yes Bank's ratings on 6 March 2020.

The upgrade takes into account the bailout of the bank's depositors and senior creditors under the Yes Bank Reconstruction Scheme, as approved by the Indian Government (Baa2 negative) on 13 March 2020. The rating action also takes into account the confirmation by the Indian authorities and Yes Bank that the moratorium on its depositors and creditors will be lifted on 18 March 2020.

Moody's could upgrade the ratings further if the bank's financial fundamentals, including its depositor franchise, stabilize such that the risk of losses to senior creditors and depositors further declines.

However, a worsening of the bank's fundamentals due to an increase in asset risk or a significant outflow of deposits after the RBI's moratorium is lifted resulting in lower recovery rates for the bank's creditors, could lead to a further downgrade of the bank's ratings.

Yes Bank is a full service commercial bank' providing a complete range of products, services and technology driven digital offerings, catering to corporate, MSME & retail customers.

The private lender on Saturday (14 March) reported a record loss of Rs 18,560.31 crore in Q3 December 2019 as against a net profit of Rs 1001.85 crore in Q3 December 2018. Total income in the December quarter stood at Rs 6268.50 crore, down by 29.17% from Rs 8849.81 crore reported in the same period last year.

Net interest income declined 60.1% to Rs 1,065 crore in Q3 December 2019 from Rs 2,666 crore in Q3 December 2018. Net interest margin (NIM) stood at 1.4% in Q3 December 2019 as compared to 3.3% in Q3 December 2018.

The bank's provisions and contingencies surged 4401% to Rs 24,766 crore in Q3 December 2019 from Rs 550 crore in Q3 December 2018.

The ratio of gross NPAs to gross advances stood at 18.87% as on 31 December 2019 as against 7.39% as on 30 September 2019 and 2.10% as on 31 December 2018. The ratio of net NPAs to net advances stood at 5.97% as on 31 December 2019 as against 4.35% as on 30 September 2019 and 1.18% as on 31 December 2018.

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