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YES Bank declines on rating downgrade by India Ratings; rebounds later

Shares of YES Bank moved higher by 7.4 per cent to Rs 50.20, bouncing back nearly 12 per cent from its intra-day low of Rs 45, on the BSE on Thursday on the back of heavy volumes.

A combined 188 million equity shares have changed hands on the NSE and BSE till 02:30 pm. In comparison, the S&P BSE Sensex was up 0.31 per cent at 41,686 levels.

The stock of the private sector lender slipped 3.7 per cent to Rs 45 after rating agency India Ratings and Research (Ind-Ra) downgraded its long-term issuer rating to ‘IND A’ from ‘IND A+’ and its short-term issuer rating to ‘IND A1’ from ‘IND A1+’. The agency has simultaneously placed the ratings on Rating Watch Negative (RWN).

“The downgrade reflects the inadequate progress as per Ind-Ra’s expectations with respect to the quantum and pace of equity infusions, which is critical for providing sufficient cushion for the credit cost impact of the stressed asset pool,” the agency said in its rating rationale.

The agency further added that, in the near term, it expects “certain standard stressed group exposures (rated BB and below) of the bank to continue to slip into the non-performing category”.

“The need to accelerate provisions on existing gross non-performing assets (GNPAs) and additional slippages along with the reduced pool of performing assets would keep the profitability of the bank under pressure. The RWN reflects the dependency of the rating level on the timing and quantum of equity raise by the bank,” it added.

The rating agency, however, said YES Bank has managed its liability structure reasonably well in a challenging year.

“Ind-Ra understands that the bank would focus on multiple granular income streams, assets and liabilities that would play out gradually while maintaining its core competency in corporate lending. The bank plans to focus on other competences that it has developed on the technological front to expand its partnerships in the banking business. Ind-Ra has considered an equity infusion of USD1 billion-1.2 billion into the bank in the next few weeks,” it added.

Source: Maalaimalar