Singapore: Moody's Investors Service on Thursday downgraded Yes Bank's long-term foreign currency issuer rating to B2 from Ba3.
Moody's also downgraded the bank's long-term foreign and local currency bank deposit ratings to B2 from Ba3, foreign currency senior unsecured MTN programme rating to (P)B2 from (P)Ba3, and baseline credit assessment (BCA) and adjusted BCA to b3 from b1.
"The outlook on the bank's ratings where applicable is negative. Today's rating actions conclude Moody's review for downgrade initiated on November 6," said Moody's.
The downgrade of Yes Bank's deposit and senior unsecured programme ratings to B2 from Ba3 and (P)B2 from (P)Ba3 takes into account Moody's expectation that the bank's pool of potential stressed assets and low loss-absorbing buffers against those assets -- will add pressure to its funding and liquidity, creating additional risks to its standalone credit profile or BCA.
Moody's expects Yes Bank's common equity tier 1 (CET1) ratio of 8.7 per cent at the end of September to come under significant pressure unless the bank can raise new capital in the next few quarters.
Moody's said that Yes Bank has received offers from a number of financial investors to invest up to two billion dollars through new equity capital into the bank. Nevertheless, there are significant execution risks around the timing, price and regulatory approvals required.
The rating actions reflect Moody's view that Yes Bank's funding and liquidity compares weakly to other rated private sector peers in India, and could come under pressure if the bank cannot strengthen its solvency in the next few quarters.
Yes Bank's ratings also take into account Moody's expectation of a moderate level of support from the government (Baa2 negative) in times of need, which results in a one-notch uplift to the bank's ratings from its BCA.
Moody's expects that the Indian authorities will strive to maintain systemic stability and help prevent any weakness in the bank's standalone credit profile from significantly affecting depositors and creditors. The support assumption also takes into account the bank's modest, but increased franchise and relative importance to India's banking system.