The rating action, acccording to Icra, factored in further weakening in core equity (CET-I) capital cushion, due to voluntary provisions and consequent losses in Q4FY19. The rating agency has also downgraded the lender's tier-I bond from "AA-" to "A" and tier-II bonds from "AA" to "AA-". The outlook being negative on both bonds. CLICK HERE FOR THE FULL REPORT
Icra had earlier downgraded the bank's long-term ratings, on November 28, 2018, and had kept them on watch with "negative implications", whereby the bank’s ability to maintain its asset quality and improve the CET-I capital cushion was highlighted as a key rating sensitivity among others.
In the past four trading days, the stock has tanked 30 per cent from the level of Rs 237 on April 26, after the bank reported a whopping Rs 1,506 crore net loss, its first ever quarterly loss, for the March quarter (Q4FY19) after provisions soared over nine times. It had posted a profit of Rs 1,179 crore in the year-ago period.
“In its recently declared earnings for Q4 FY2019, the bank reported a significant increase in BB and below rated advances, given the deterioration in the credit profile of some of its larger borrowers. The share of such BB and below advances stood at 7.1 per cent of its advances as on March 31, 2019,” Icra said in rating rational.
With a sizeable increase in the share of BB and below rated advances and the weakened capital cushions, the outlook on the ratings remains negative, Icra said.
"The bank’s ability to resolve these advances in a timely manner will remain a key driver of its asset quality, profitability and capital position. It’s ability to reduce BB and below rated advances and improve the CET-I capital cushion along with diversification of advances and liabilities will result in a change in the outlook to stable from negative," the rating agency said.
At 09:54 am, YES Bank was trading 3 per cent lower at Rs 171 on the BSE. In comparison, the S&P BSE Sensex was down 0.77 per cent at 38,665 points. A combined 13.3 million shares have changed hands on the counter on the BSE and NSE so far.