YES Bank surges nearly 4% in intraday trade on ICRA's liquidity remark

Shares of private sector lender YES Bank rose nearly 4 per cent in intraday trade on the Bombay Stock Exchange (BSE) on Thursday as investors were buoyed by ICRA comment that the bank has sufficient liquidity for now. The rating agency said that YES Bank's liquidity coverage ratio (LCR) was at 113.83 per cent in September quarter of this fiscal as against the RBI's requirement of 100 per cent as on January 1, 2019.

"ICRA draws comfort from the bank's access to call money markets and the RBI's marginal standing facility mechanism in case of urgent liquidity requirement," the rating agency said.

Paring previous session losses, YES Bank share price rose as much as 3.73 per cent to hit an intraday high of Rs 70.80 apiece on the BSE after opening higher at Rs 68.75 against previous close level of Rs 68.25.

In a similar fashion, YES Bank shares were trading 0.44 per cent higher at Rs 68.50 per cent on the National Stock Exchange (NSE). The scrip touched an intraday high of Rs 70.80 against previous closing price of Rs 68.20.

In the last one month, YES Bank share price rallied over 75 per cent, while it has declined over 60 per cent since the beginning of this year due to a series of negative developments. During the last one year, YES Bank share price has fell nearly 70 per cent.

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The agency, however, maintained that the bank's ability to retain and rollover deposits will remain critical to the liquidity in wake of the weak asset quality and profitability reported during second quarter of this fiscal.

The bank's asset quality deteriorated further in Q2FY20 with gross and net NPA of 7.4 per cent and 4.4 per cent, respectively (versus 5 per cent and 2.9 per cent, respectively as on June 30, 2019).

Taking note of the binding term sheet received by YES Bank for equity infusion of $1.2 billion from an investor, ICRA said that the proposed offer for capital infusion which is yet to be accepted by the bank is valid till November 30, 2019, even though the fund infusion will remain contingent on various regulatory approvals. Any delay in capital raising will remain a negative trigger for the rating, it added.

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Even if the bank accepts the said offer, it will need to reduce its share of stressed loans and prevent slippages from its standard BB and below rated book, given the sizeable quantum of stressed assets, ICRA said.

"This would remain critical for its earnings as well as solvency profile and will remain a key rating sensitivity," it said.

ICRA expects that despite the proposed capital raise by the bank, it's ability to resolve its stressed exposures in a timely manner will remain a key driver of its asset quality, profitability and solvency and will hence be a rating driver. The agency had earlier downgraded its long-term ratings on YES Bank, on July 24, 2019, and had kept them on a Negative outlook.

In a separate development, the bank informed the exchange that it has allotted 1.4 lakh equity shares of face value of Rs 2 each on November 13, 2019 under employee stock ownership plan (ESOP) plans.

Edited by Chitranjan Kumar