Shares of Yes Bank jumped over 10 percent, hitting a 52-week high level of Rs 16 apiece on the BSE.
Credit rating agency CARE upgraded the ratings on Infrastructure Bonds, Lower Tier II Bond, Tier II Bonds (Basel III), Upper Tier II Bonds.
At 10.12 AM, the share price was up 4.76 percent or Rs 0.70 to Rs 15.40 per share on the BSE.
Rationale in upgrading
CARE Ratings said, The revision in ratings assigned to the debt instruments of Yes Bank Limited (YBL) factors in the bank’s continued demonstration of stabilisation of operations and growth in business i.e. advances as well as deposits, with strong growth in
Current Asset and Savings Account (CASA) deposits and continued improvement in profitability during 9MFY22 with stable asset quality parameters amidst concerns over Covid-19 related stress.
The ratings continue to factor in the improvement in the credit profile of the bank post the implementation of the reconstruction scheme for the bank that was announced by the Reserve Bank of India (RBI) and approved by Government of India (GOI) from March, 2020 which brought about strong systematic support to the bank by various market participants including GOI, RBI and State Bank of India (SBI; rated ‘CARE AAA; Stable for Tier II Bonds) acting in order to protect the depositors’ money by way of providing capital support, liquidity support and reconstitution of the Board of Directors for better governance and the subsequent capital raise of Rs.15,000 crore through Follow on Public Offer (FPO) in July, 2020 which has improved the capitalisation level of the bank increasing its ability to absorb asset quality shocks as well as provide growth capital.
The ratings also factor in the steady growth in deposit base witnessed by the bank, the shift towards retail lending and granularization of advances profile and improvement in liquidity profile of the bank.
The ratings continue to remain constrained on account of weak asset quality parameters due to concentrated exposure to certain stressed corporate groups as well as slippages witnessed in the retail and MSME advances on account COVID-19 induced lockdowns. The bank has seen recoveries and upgrades from bad accounts which have off-set the slippages during 9MFY22 keeping NPA levels stable in absolute terms. While the bank has been making provisions to increase its provision coverage (stood at 67.46 percent as on December 31, 2021) which has kept the credit costs elevated and profitability moderate.
The bank expects recovery to be higher than the expected slippages in the near term, however, the proportion of stressed advances to the net worth remained relatively higher for the bank and higher than expected slippages may further impact the financial risk profile of the bank and would continue to remain a key monitorable.
Further, while the bank has seen improvement in the deposits, the proportion of bulk deposits continues to remain high leading to depositor concentration.
CARE Ratings has withdrawn the rating assigned to the Lower Tier II Bonds of Rs.543 crore with immediate effect, as the company has made payment of principal and interest in full and there is no amount outstanding under the issue as on date.
