CARE Ratings upgrades LT rating of Yes Bank

13 Oct 2022 , 10:57 AM

The agency has upgraded the rating of the banks infrastructure bonds, lower tier-II bonds, tier-II bonds (Basel-III) to ?CARE A- / Positive? from ?CARE BBB+ / Positive?. It has also upgraded the rating on the banks upper tier-II bonds to ?CARE BBB / Positive? from ?CARE BBB- /Positive?. CARE Ratings said that the revision in ratings assigned to the debt instruments of Yes Bank (YBL) factors in the stabilisation of the banks operations and growth in business i.e. advances as well as deposits since the banks reconstruction leading to improvement in scale, focus on granularization of the advances with expected increase in the proportion of retail lending and SME lending and reduction in ticket size in the corporate lending segment, strong growth in Current Asset and Savings Account (CASA) deposits and continued improvement in profitability during FY22 (refers to period from April 01 to March 31). Further, rating also factors in expected capital infusion of Rs 8,898 crore by way of preferential allotment of equity shares and equity warrants; of which Rs 6,045 crore (Rs 5,093 crore as equity capital and Rs 951 crore as 25% of share warrant issue) is expected to be raised in FY23 while the remaining equity capital expected to be raised within 18 months from date of allotment of warrant and improvement in asset quality parameters amidst concerns over COVID-19 related stress and improvement in the liquidity profile of the bank. The revision in rating also factor in the banks proposed sale of significant proportion of its stressed assets to an asset reconstruction company (ARC) which is expected to bring down the headline Gross NPA ratios in the near term. The ratings continue to remain constrained on account of weak asset quality parameters as compared to peer banks due to concentrated exposure to certain stressed corporate groups as well as slippages witnessed in the retail and MSME advances on account COVID-19 induced lockdowns. The bank has seen recoveries and upgrades from bad accounts which have off-set the slippages during FY22 keeping NPA levels stable in absolute terms. While the bank has been making provisions to increase its provision coverage on advances (stood at 70.67% as on 31 March 2022) which has kept the credit costs elevated and profitability moderate. The bank expects recovery to be higher than the expected slippages in the near term, however, the proportion of Net NPA to the net worth remained relatively higher for the bank albeit improving and higher than expected slippages may further impact the financial risk profile of the bank and would continue to remain a key monitorable Further, the proportion of bulk deposits continues to remain high leading to depositor concentration. Yes Bank is a new generation private sector bank. As on 31 March 2022, the bank has 1,122 branches, 95 BC managed banking outlets and 1,244 ATMs, CRMs and BNAs. The bank reported 50.2% jump in standalone net profit to Rs 310.63 crore on 9.7% increase in total income to Rs 5,916.28 crore in Q1 FY23 over Q1 FY22. The scrip fell 1.56% to currently trade at Rs 15.75 on the BSE. Powered by Capital Market – Live News