Moody’s has assessed that the downside risks to the bank’s credit profile have diminished.


Moody’s investor service has affirmed Yes Bank’s rating and changed the outlook to “stable” from “negative” following the recent development, including the appointment of a new MD and CEO and nil divergences report from the Reserve Bank of India (RBI). However, given the “stable” ratings outlook, Moody’s is unlikely to upgrade the bank’s ratings during the outlook horizon of the next 12-18 months.

The rating action is based on recent development, including the results of the RBI’s risk assessment report and Yes Bank’s financial performance. It has come soon after the RBI warned the Yes Bank of regulatory action for disclosure of nil divergence report in violation of the confidentiality clause. Yes Bank officials, contacted by The Sunday Guardian, did not comment on the issue.

Moody’s, however, said the rating could be downgraded if there is a sustained deterioration in impaired loans or loan loss reserves, or if the rate of new nonperforming loan formation is significantly higher than previously experienced or the bank›s capital ratios decline due to its inability to raise new capital.

Moody’s has assessed that the downside risks to the bank›s credit profile have diminished and, therefore, it has changed the bank›s ratings outlook to stable from negative, because such risks form the key driver for the change in the outlook.

Interestingly, Moody’s, in November last year, had downgraded Yes Bank’s rating and changed the outlook to negative citing concerns over corporate governance and impact of the change in its top leadership as then MD and CEO Rana Kapoor was asked to step down by the RBI.

The rating agency, however, said it continues to maintain a negative adjustment for corporate behavior in the bank’s standalone credit profile. “Although Yes Bank’s reported credit fundamentals remain stable, the bank’s aggressive growth strategy poses risks to its financial performance,” it said adding, the RBI report highlighted “several other lapses and regulatory breaches in various areas of the bank’s functioning”.

The rating agency further said it is unlikely to upgrade the bank’s rating during the outlook horizon of the next 12-18 months. However, it could change the ratings outlook to positive if Yes Bank maintains its current asset-quality profile, strengthens its loss-absorbing buffers by bringing its capital ratios in line with similarly-rated banks and strengthens its loan-loss reserves, and also reduces concentration risk on the asset side and further improves its liability profile.

In January, the bank appointed Ravneet Gill as its MD and CEO, and completed the leadership transition from the bank›s founder and long-time MD and CEO Rana Kapoor. The leadership transition was at the directive of the RBI in September 2018 to restrict Kapoor›s term until 31 January 2019.


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