Ind-Ra downgrades YES Bank on inadequate equity infusion; places on RWN

India Ratings and Research (Ind-Ra) has downgraded Yes Bank Long-Term Issuer Rating from “A+” to “A” due to the inadequate progress in the quantum and pace of equity infusion.

The fresh capital is critical for providing sufficient cushion for the credit cost impact of the stressed asset pool. Ind-Ra has considered an equity infusion of $1-1.2 billion into the bank in the next few weeks.

Privare lender's stock was trading 2.25% down at Rs 45.7 per share on BSE.

It’s Short-Term Issuer Rating has been downgraded to “A1” from “A1+”. Ratings have been placed on Rating Watch Negative (RWN) reflecting the dependency of the rating level on the timing and quantum of equity raise by the bank.

The liquidity position of the bank seemed adequate at end-September 2019. But in the absence of improvements on the capital side, the ability to manage its asset and liability maturities might be tested further, rating agency said in a statement.

The bank is likely to face balance sheet expansion challenges over the short-to-medium term as it implements new strategies. It will also have to continue to deal with the overhang of stressed assets and resultant credit costs.

There is also the possibility that its steady state non-interest income could reduce substantially from the historical peaks under a benign case scenario. These factors could have at least a medium-term bearing on the income profile of the bank.

In the near term, certain standard stressed group exposures (rated BB and below) would continue to slip into the non-performing category. The need to accelerate provisions on existing GNPAs and additional slippages along with the reduced pool of performing assets would keep the profitability of the bank under pressure, rating agency said.

The bank has managed its liability structure reasonably well in a challenging year. The bank would focus on multiple granular income streams, assets and liabilities that would play out gradually while maintaining its core competency in corporate lending.

The bank plans to focus on other competences that it has developed on the technological front to expand its partnerships in the banking business, agency added.