The agency has assigned "CARE A1+” rating to the certificate of deposits of the bank.
CARE Ratings said that the revision in the ratings assigned to the debt instruments of Yes Bank (YBL) factor in continued growth in business with focus on granularisation of the advances and increase in the proportion of retail lending and small & medium enterprises (SME) lending and reduction in the higher ticket corporate lending segment, along with growth in the deposit franchise with stable growth in retail deposits and the current account and savings account (CASA) deposits, adequate capitalisation level supported by infusion of fresh equity capital during H1FY23 (refers to the period from April 01 to September 30) and improvement in the asset quality parameters on account of lower incremental slippage and sale of non-performing assets (NPAs) to JC Flower Asset Reconstruction Company (ARC).
The ratings continue to factor in the improvement in the credit risk profile of the bank post the implementation of the reconstruction scheme.
Further, the ratings factor in adequate capitalisation, which strengthened during FY23 (refers to the period from April 01 to March 31) through capital infusion of Rs 6,037 crore as envisaged for FY23 which is part of the planned equity infusion of Rs 8,898 crore by way of preferential allotment of equity shares and equity warrants, while the remaining Rs 2,846 crore is expected to be infused in the near term, which would provide support for growth and any credit losses.
The ratings are constrained due to continued dependence on wholesale/bulk deposits and although the bank has shifted focus on retail and SME loans, the track record remains limited which needs to be monitored over a period of time. Further, the proportion of stressed assets remains relatively higher, and profitability muted.
The bank has seen recoveries and upgrades from bad accounts which have offset the slippages during FY23, keeping NPA levels stable in absolute terms. While the bank has been making provisions to increase its provision coverage, which has kept the credit costs elevated and profitability moderate, the ability of the bank to maintain the asset quality once the performance of the relatively new retail products is established, would be a key rating monitorable.
Further, an adverse judgement in the pending legal proceedings on Additional Tier I (AT I) bonds would impact the growth capital of YBL, which would remain a key monitorable.
Yes Bank is a new generation private sector bank. As on 30 June 2023, the bank had 1,212 branches, 150 BC managed banking outlets and 1,327 ATMs, CRMs and BNAs.
The scrip shed 0.29% to currently trade at Rs 17.15 on the BSE.
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