Mumbai: Global rating agency Moody's Investors Service on Tuesday placed Yes Bank’s foreign currency issuer rating of Ba1 under review for downgrade. In addition, the agency has also placed the bank's long-term foreign and local currency bank deposit ratings, foreign currency senior unsecured medium term note (MTN) programme rating of and Baseline Credit Assessment (BCA) and adjusted BCA of ba2 under review for downgrade.
The move comes a day before the bank’s annual general meeting scheduled on Wednesday.
The rating agency said that the review for the downgrade takes into account the expectation that the ongoing liquidity pressures on Indian finance companies will negatively impact the credit profile of Yes Bank, given the bank's sizeable exposure to weaker companies in the sector. At the end of March 2019, Yes Bank's exposure to Indian housing finance companies (HFCs) and non-bank finance companies (NBFCs) represented 6.4 per cent of its total exposure. In addition, Yes Bank has a 7 per cent direct exposure to the commercial and residential real estate sector date, which is also under pressure.
In April 2019, the bank classified about Rs 10,000 crore of its exposures, representing 4.1 per cent of its total loans under the watchlist, which could translate into non-performing loans over the next 12 months, said Moody’s.
Taking into account the bank's own disclosure of the stressed book, as well as Moody's expectation of stress in the Indian HFC, NBFC and real estate sectors, Moody's expects significant pressure on the bank's asset quality and therefore profitability and capital position. Nevertheless, the impact will be somewhat cushioned by the bank's proactive loan loss provisioning for anticipated stress. During the fiscal year ended March 2019, the bank made loan loss provisions of about 20 per cent for the loans on the watchlist.
"The bank's weak performance in fiscal 2019 led to its capital, as measured by the common equity tier 1 ratio, falling to 8.4 per cent from 9.7 per cent in fiscal 2018. The bank's board has approved an up to $1 billion equity capital raise. If Yes Bank cannot raise the capital, its loss absorbing capacity and therefore financial profile will be under pressure,” said Moody’s.
The scrip of Yes Bank closed up 2.50 per cent at Rs 139.30 on the BSE....