Moody’s Upgrades YES Bank’s Ratings To 'Ba2', Outlook Stable

Moody's Ratings on Friday upgraded YES Bank’s long-term foreign currency and local currency deposit ratings to 'Ba2' from 'Ba3'. The rating agency also affirmed the bank’s baseline credit assessment and adjusted baseline credit assessment at 'ba3', while changing the outlook on all ratings to stable from positive.

The upgrade reflects a gradual improvement in the bank’s credit profile, including stronger capital and loan-loss reserves that offer adequate buffers against unseasoned asset risks, Moody’s said. These factors are also expected to support modest profitability and funding.

YES Bank’s 'Ba2' deposit ratings are one notch above its 'ba3' baseline credit assessment based on Moody's expectation of a moderate likelihood of government support, given India’s 'Baa3' (stable) sovereign rating.

Moody’s said an upgrade in the bank’s baseline credit assessment and ratings could follow if pre-provisioning profit to total assets improves above 1.5%, or if the bank’s funding profile strengthens further.

Conversely, a downgrade could be triggered if asset quality or capital weakens and pre-provisioning profit to total assets stays below 1.0%. A material deterioration in funding or liquidity would also be negative for the ratings, the agency added.

For the March quarter, YES Bank reported a 63% on-year rise in net profit to ₹7.4 billion, and a 20.6% increase sequentially.

Provisions dropped 32.4% on year to ₹3.18 billion, although they rose 23% quarter-on-quarter.

Asset quality remained stable, with gross non-performing assets unchanged at 1.6% as on March 31. The net NPA ratio declined slightly to 0.3% from 0.5% a quarter earlier, while the provision coverage ratio stood at 87.6%.