India Ratings revises rating watch on Yes Bank; withdraws AT1 bonds' rating

A day after Yes Bank resumed complete banking services, India Ratings and Research (Ind-Ra) has revised rating watch on the lender's long-term issuer rating, citing the recent systemic support offered to the bank by new investors. The agency has revised the bank's long-term issuer rating of 'IND BB-' to rating watch evolving (RWE) from rating watch negative (RWN). The RWE indicates that the ratings may be upgraded, downgraded or affirmed.

"Ind-Ra has revised the rating watch on Yes Bank Ltd's long-term issuer rating of 'IND BB-' to RWE from RWN," Yes Bank said in a filing to the Bombay Stock Exchange on Thursday.

The revision follows the systemic support Yes Bank has received recently, in terms of both equity and liquidity, from the new set of investors and the regulator for its reconstruction, Ind-Ra said. It also considers the pressure that could show up on the liabilities once the regulator-imposed moratorium is lifted.

Ind-Ra had downgraded the bank's ratings on March 6, 2020 and maintained them on RWN in wake of the temporary regulator-imposed moratorium on the bank.

Subsequently, the Yes Bank reported a huge loss of Rs 18,564 crore for the third quarter ended December 2019, against a net profit of Rs 1,000.5 crore in the same quarter last year, due to a sharp rise in bad loans. The bank's gross non-performing assets (NPAs) spiked to 18.87 per cent - the highest in the private banking space. In absolute terms, Gross NPA of Yes Bank surged to Rs 40,709 crore in the December quarter from Rs 5,158 crore a year ago.

"In its communication to the markets, Yes Bank has indicated that as a prudent measure, it has provided a substantially higher amount than required under the Reserve Bank of India's (RBI) norms and NPA recognition and provisions cover FY20 till the time of publishing the 3QFY20 results and not just end-December 2019," Ind-Ra said. So, the bank may see limited credit costs over the next couple of quarters, it added. 

Besides, Ind-Ra has withdrawn rating on Basel III AT1 bonds. "The AT1 bonds of Rs 8,415 crore have been fully written down and extinguished, adding to the net worth of the bank," the agency said.

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