Moody’s places Yes Bank under review for downgrade; here’s what weighs on private lender

Rating agency Moody’s on Tuesday placed Yes Bank under review for downgrade, owing to the private-sector lender’s exposure to weak companies in the financial sector. The ongoing liquidity pressure on the country’s finance companies is likely to impact credit profile, the rating agency also said in a note. The private sector lender has ‘sizeable exposure’ to weaker non banking financial companies (NBFCs), it added. “The review for downgrade takes into account Moody’s expectation that the ongoing liquidity pressure on Indian finance companies will negatively impact the credit profile of Yes Bank, given the bank’s sizeable exposure to weaker companies in the sector,” the rating agency added.

The global rating agency also said that it may downgrade rating if bank’s capital ratio declines on its inability to raise capital. In April 2019, the private lender has classified about Rs 100 billion of its exposures, representing 4.1 per cent of the total loans under the watchlist, that could translate into bad loans over the next 12 months, Moody’s said in the same note.

The bank had recently undergone a few changes including the appointment of an external candidate as MD and CEO, Ravneet Gill. The RBI also appointed a retired RBI Deputy Governor, R Gandhi, as an additional director at the Board of the bank.

Meanwhile, Yes Bank reported a surprise loss of Rs 1,506.64 crore for the quarter ended March on rise in provisions and contingencies. The bank had recorded a net of Rs 1,179.44 crore for the corresponding quarter. The provisions zoomed to Rs 3,661.70 crore in the fourth quarter from Rs 399.64 crore in the corresponding period of the previous year.

Shares of Yes Bank closed the day at Rs 139.75, up 3.85, or 2.83% on NSE.

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