Singapore, November 10, 2021 -- Moody's Investors Service has upgraded Yes Bank Limited's long-term
foreign currency issuer rating and long-term foreign and local
currency bank deposit ratings to B2 from B3. Moody's has also upgraded
Yes Bank's Baseline Credit Assessment (BCA) and Adjusted BCA to b3 from
caa2.
At the same time, Moody's has changed the outlook on Yes Bank's
ratings where applicable to positive from stable, reflecting Moody's
expectation of a further improvement to the bank's credit profile,
driven by a cleanup of legacy stressed assets and/or improvements to its
capital and profitability.
For a detailed list of the affected ratings for both Yes Bank Limited
and Yes Bank, IFSC Banking Unit Branch, please refer to the
end of this press release.
RATINGS RATIONALE
Moody's has upgraded Yes Bank's issuer rating to B2 from B3
because its funding and liquidity have substantially improved in the past
year, which have strengthened depositor and credit confidence in
the bank. The rating action also reflects the fact that despite
the significant economic challenges since the onset of the pandemic,
Yes Bank's asset quality has deteriorated only modestly while its
capital has remained stable.
The improved financials metrics are reflected in the two-notch
upgrade of the bank's BCA to b3 from caa2. Moody's
has also lowered government support assumption for Yes Bank to moderate
from high, which results in a one-notch uplift to the B2
issuer rating from the b3 BCA. The support assumption is in line
with the support expected for other private sector banks in India.
Yes Bank's deposits have increased over 65% between 30 September
2021 and 31 March 2020, after Indian regulators rescued the bank.
Its deposit quality has also improved; current and savings account
and retail term deposits represent 45% of total funding as of 30
September 2021, compared with just 31% as of 31 March 2020.
Concurrently, the bank has reduced its share of market funding,
while its average liquidity coverage ratio (LCR) improved to 118%
as of 30 September 2021 from 40% as of 31 March 2020.
Yes Bank's asset quality remains weak and continues to pose risks
to its profitability and capital. While its reported nonperforming
loan (NPL) ratio declined moderately to 15% as of 30 September
2021 from 17% as of 31 March 2020, the bank's off-balance
sheet exposures to NPLs, restructured loans and loans overdue for
more than 60 days, which represent 5.5% of total loans
as of 30 September 2021, pose risks.
The bank plans to transfer a large share of NPLs to an asset reconstruction
company over the next 12 months. Subject to the terms and conditions
of the transaction, Moody's expects the NPL transfer will
be credit positive as it will ease management burden on resolving legacy
problem assets and help the bank focus on growing its assets and liabilities.
High NPLs and a moderation in credit growth have hurt Yes Bank's revenues,
while operating costs remain high relative to its revenues. Moody's
expects that boosting profitability will remain a credit challenge until
the bank manages to stabilize its franchise, lower NPLs and grow
its assets.
The bank's Common Equity Tier 1 ratio of 11.5% as
of 30 September 2021 provides moderate cushion against unexpected risks.
Moody's expects Yes Bank will need to raise new equity capital in
the next 12 months to support asset growth because its modest profitability
does not support internal capital generation.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the positive outlook, Moody's could upgrade Yes Bank's
ratings if the bank's asset quality and/or capital materially improve.
Moody's could downgrade the bank's ratings and BCA if its capital
deteriorates significantly because of a strain on its asset quality,
or if its funding and liquidity deteriorate.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Yes Bank is headquartered in Mumbai and reported consolidated assets of
INR2,886 billion ($38.8 billion) as of 30 September
2021.
LIST OF AFFECTED RATINGS:
..Issuer: Yes Bank Limited
.... Adjusted Baseline Credit Assessment,
Upgraded to b3 from caa2
.... Baseline Credit Assessment, Upgraded
to b3 from caa2
.... Long-Term Counterparty Risk Assessment,
Upgraded to B2(cr) from B3(cr)
.... Long-Term Counterparty Risk Rating
(Local and Foreign Currency), Upgraded to B2 from B3
.... Short-Term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Short-Term Counterparty Risk Rating
(Local and Foreign Currency), Affirmed NP
.... Short-Term Deposit Rating (Local
and Foreign Currency), Affirmed NP
.... Long-Term Issuer Rating (Foreign
Currency), Upgraded to B2 from B3; Outlook, Changed To
Positive From Stable
....Senior Unsecured Medium-Term Note
Program (Foreign Currency), Upgraded to (P)B2 from (P)B3
....Long-Term Bank Deposit Rating (Local
and Foreign Currency), Upgraded to B2 from B3; Outlook,
Changed To Positive From Stable
....Outlook, Changed To Positive From
Stable
..Issuer: Yes Bank, IFSC Banking Unit Branch
.... Long-Term Counterparty Risk Assessment,
Upgraded to B2(cr) from B3(cr)
.... Long-Term Counterparty Risk Rating
(Local and Foreign Currency), Upgraded to B2 from B3
....Senior Unsecured Medium-Term Note
Program (Foreign Currency), Upgraded to (P)B2 from (P)B3
....Senior Unsecured Regular Bond/Debenture
(Foreign Currency), Upgraded to B2 from B3; Outlook,
Changed To Positive From Stable
.... Short-Term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Short-Term Counterparty Risk Rating
(Local and Foreign Currency), Affirmed NP
....Outlook, Changed To Positive From
Stable
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
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available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Alka Anbarasu
Senior Vice President
Financial Institutions Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Graeme Knowd
MD - Banking
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
