US credit rating agency Moody's on Tuesday placed Yes Bank's ratings under review for downgrade on the back of ongoing liquidity pressures which are expected to negatively impact the lender's credit profile.
In line with their assessment, Moody's Investors Service put Yes Bank's foreign currency issuer rating of Ba1 under review for downgrade.
"Moody's has also placed the bank's long-term foreign and local currency bank deposit ratings of 'Ba1, foreign currency senior unsecured MTN program rating of (P)Ba1, and Baseline Credit Assessment (BCA) and adjusted BCA of ba2' under review for downgrade," the ratings agency said in a statement.
Besides, Moody's placed the bank's 'Counterparty Risk Assessment of Baa3(cr) or P-3(cr)' and domestic and foreign currency 'counterparty risk rating (CRR) of Baa3 or P-3' under review for downgrade.
"The review for downgrade takes into account Moody's expectation that the ongoing liquidity pressures on Indian finance companies will negatively impact the credit profile of Yes Bank, given the bank's sizeable exposure to weaker companies in the sector," the statement said.
The ratings agency noted that at the end of March 2019, Yes Bank's exposure to Indian housing finance companies (HFC) and non-bank finance companies (NBFC) represented 6.4 per cent of its total exposure.
As per the statement, the lender had a 7 per cent direct exposure to the commercial and residential real estate sector. This sector is also under pressure due to the worsened liquidity conditions.
"In April 2019, the bank classified about Rs 100 billion of its exposures, representing 4.1 per cent of its total loans under the watchlist, that could translate into non-performing loans over the next 12 months," the statement said.
"Nevertheless, the impact will be somewhat cushioned by the bank's proactive loan loss provisioning for anticipated stress," the statement added.
In the fiscal year ended March 2019, the bank made loan loss provisions of about 20 per cent for the loans on the watchlist.
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