In past 10 trading days, YES Bank has underperformed the market by falling 23%, after the resignation of various members of the bank's board of directors. In comparison, the S&P BSE Sensex was up 1.5% during the same period. The stock is trading close to its 52-week low price of Rs 166 touched on September 28, 2018.
“The rating action considers the resignation of various members of the bank's Board of Directors -- which, when seen in conjunction with the Reserve Bank of India's (RBI) directive in September 2018 to restrict the term of the bank's managing director & CEO as well as founder, Rana Kapoor, till 31 January, 2019 -- have raised Moody's concerns over corporate governance,” the rating agency said in a statement.
Moody's said that despite the bank reporting stable credit fundamentals, the developments on the governance issues, as well as the transition of leadership, are credit negative.
The negative outlook takes into account the uncertainty relating to the bank's asset quality and profitability performance and in particular any adverse findings from the RBI's risk-based supervision report or the so-called divergence report. In addition, any negative developments in the bank's funding and liquidity profile or ability to raise new capital to a level comparable with other similarly rated peers in India will exert pressure on its BCA, adjusted BCA and ratings, it added.
YES Bank in a separate regulatory filing announced that it has acquired additional 4.59 million equity shares of Dion Global Solutions pursuant to an invocation of pledge on the said equity shares subsequent to default by the company in repayment of credit facilities sanctioned by the bank.