Mumbai: Global rating agency Moody's, on Monday, kept Yes Bank's ratings under review for a downgrade, noting that the private sector lender has more than Rs 10,000 crore of loans under a watchlist and Rs 7,500 crore investment in bonds that have been downgraded.
"Based on management expectation, these watchlist loans could potentially translate into non-performing loans over the next two to three quarters," Moody's Investors Service said, adding that about 10 per cent of its total investment holdings have experienced rating downgrades in the past quarters.
"Moody's expects Yes Bank will remain dependent on external capital raising to help maintain its capital level above the regulatory requirements," it said, adding that during the review period, it will try to get more clarity on the bank's ability to raise new capital and also sufficiency of the capital raised against the asset quality stress.
"Any inability of the bank to raise equity capital over the next one to two quarters will add significant pressure to its ratings," Moody's warned.
The private sector lender plans to raise about $1.2 billion, at least part of which is likely by the end of the second quarter.
The review for downgrade was initiated on June 11, 2019, reflecting Moody's expectation that the ongoing liquidity pressures on Indian finance companies will negatively impact Yes Bank's credit profile, given the bank's sizeable exposure to weaker companies in the sector the rating agency said.
On July 17 2019, Yes Bank reported its financial performance for the quarter ended June 30, 2019. For the quarter ended June 30, 2019, the bank's asset quality deteriorated, with the gross non-performing loan (NPL) ratio increasing to 5 per cent of gross loans as compared to 3.2 per cent at the end of March 2019. The bank's profitability also declined, with an annualized return on assets of 0.1 per cent as compared to 0.5 per cent in the fiscal year ended 31 March 2019 (fiscal 2019). The bank's reported common equity tier 1 (CET1) ratio also declined to 8 per cent as compared to 8.4 per cent at the end of March 2019.
