India Ratings (Ind-Ra) has downgraded Yes Bank’s long-term issuer rating to ‘A-’ from ‘A’ while maintaining it on Rating Watch Negative (RWN). The downgrade reflects the continued delay and inconclusive quantum of the anticipated equity infusion in the bank.
This is the third downgrade of the private sector lender by Ind-Ra in last one year — which could adversely impact the bank’s franchise and potentially create challenges on asset and liability side.
The bank has sizable foreign currency liabilities and institutional deposits. However, the required capital infusion is critical for providing sufficient cushion to the possible credit cost impact from the stressed asset pool on the regulatory capital requirements in the short and medium-term. The infusion is also crucial for the bank’s ability to continue to serve its customers adequately.
The liquidity position of the bank seemed adequate at end-September 2019 (liquidity coverage ratio of 114 per cent). But, in absence of any swift capital raise, the bank’s ability to manage its asset and liability maturities could get tested further.
Yes bank continues to remain in discussions with various potential investors. However, raising sizeable capital soon could be challenging and would require various regulatory and other approvals. The rating could be reviewed towards February-end 2020.
Yes Bank shares dropped 4.5 per cent on Wednesday, to Rs 35.2 per share on BSE.