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Yes Bank: Moody's upgrades rating to B2 from B3, changes outlook to positive

  • The agency said the upgrade reflects Moody's expectation of a further improvement to the bank's credit profile, driven by a cleanup of legacy stressed assets

 

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Ratings agency Moody's has upgraded private lender YES Bank's rating to B2 from B3, and changed the outlook to positive from stable.

The agency said the upgrade reflects Moody's expectation of a further improvement to the bank's credit profile, driven by a cleanup of legacy stressed assets and improvements

to its capital and profitability.

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Moody's further said because YES Bank's funding and liquidity have substantially improved in the past year, which have strengthened depositor and credit confidence in the bank.

The rating action also reflects the fact that despite the significant economic challenges since the onset of the pandemic, Moody's said, adding that YES Bank's asset quality has deteriorated only modestly while its capital has remained stable.

The ratings agency has also lowered government support assumption for Yes Bank to moderate from high, which results in a one-notch uplift to the B2 issuer rating from the b3 BCA. The support assumption is in line with the support expected for other private sector banks in India.

Yes Bank has reported a net profit of ?225 crore in the September quarter, as compared to ?129 crore in the year-earlier quarter.

Potential risks going forward include YES Bank's asset quality, said Moody's as stressed assets continue to pose risks to its profitability and capital.

On the asset quality front, gross non performing asset (NPA) ratio fell to 15% in September quarter vs 15.6% in the June quarter, while net NPA ratio also fell to 5.5% vs. 5.8% last quarter.

After the results, Yes Bank CEO said the lender will have no non-performing asset after it transfers its entire bad loan book to the asset reconstruction company (ARC) by the end of March 2022.

Net interest income in the September quarter ended September fell 23% to ?1,512 crore from ?1,973 crore a year ago.

The bank?s loan book showed signs of increased stress in the second quarter because of higher restructuring of MSME loans and the second wave of covid-19. The restructured book expanded by 24% to ?6,184 crore from ?4,976 crore a quarter ago.