India Ratings and Research (Ind-Ra) has downgraded Yes Bank Ltd's Long-Term Issuer Rating to 'IND A-' from 'IND A', while maintaining it on Rating Watch Negative (RWN).
The downgrade reflects the continued delay and inconclusive quantum of the anticipated equity infusion in Yes Bank. Ind-Ra believes this could adversely impact the bank's franchise and potentially create challenges on asset and liability side. The agency notes that the bank has sizable foreign currency liabilities and institutional deposits. This rating action is a follow up of the rating rationale published by the agency on 28 January 2020, where the agency had stated that the rating would be reviewed in February 2020.
Ind-Ra is of the view that the required capital infusion is critical for providing sufficient cushion to the possible credit cost impact from the stressed asset pool on regulatory capital requirement in the short- and medium-term, as well as for the bank's ability to continue to serve its customers adequately.
Although the liquidity position of the bank seemed adequate at end-September 2019 (liquidity coverage ratio of 114%), Ind-Ra believes that, in the absence of any swift capital raise, the bank's ability to manage its asset and liability maturities could get tested further.
The bank continues to remain in discussions with various potential investors. However, Ind-Ra believes raising sizeable capital in the very near term could be challenging and could require various regulatory and other approvals. The rating could be reviewed towards February-end 2020.
For rating AT1 instruments, the agency considers the discretionary component, coupon omission risk, and write-down / conversion risk as the key parameters. The agency has recognised the unique going concern loss absorption features of these bonds and differentiated them from the bank's senior debt (by three notches in this case). Ind-Ra envisages coupon deferrals and principal write-down risk as a modest possibility in view of Yes Bank's revenue reserve buffers.
Shares of YES BANK LTD. was last trading in BSE at Rs.37.2 as compared to the previous close of Rs. 35.2. The total number of shares traded during the day was 9626172 in over 57247 trades.
The stock hit an intraday high of Rs. 38 and intraday low of 36. The net turnover during the day was Rs. 357421491.