Share gains 9.84 pc to Rs17.30; NPA still continues to be pain point
MUMBAI/December 08-2020: Yes Bank has received a straight three-notch rating upgrade from Brickwork for its Tier I Subordinated Perpetual Bonds (Basel II) from BWR (D) to BWR (BB+) with a stable outlook.
Yes Bank shares gained 9.84 per cent on Tuesday (December 08) to close at Rs17.30 on NSE.
Brickwork stated that the rating upgrade has factored in improvement in capitalisation ratios of the bank, strong shareholder base and experienced board members.
In March 2020 RBI had superseded the Board of Directors of the bank and imposed a moratorium for a period of 30 days from March 5, 2020.
The RBI also appointed Prashant Kumar (former Deputy Managing Director and Chief Financial Officer (CFO) of SBI as the Administrator and published a draft scheme for reconstruction for the bank.
Yes Bank Reconstruction Scheme
GOI approved the ‘Yes Bank Reconstruction Scheme, 2020’ and the scheme came into effect from March 13, 2020. As per the scheme of reconstruction, the moratorium was lifted on March 18, 2020.
State Bank of India (SBI) and a few domestic private sector financial institutions invested Rs10,000 crore in the bank as a part of restructuring and to bolster the bank’s capital ratios, which had weakened significantly following the large loss in Q3, FY20 on account of higher provisions.
The common equity Tier I (CET-I) and total capital adequacy ratio (CAR) had fallen to 0.6 per cent and 4.1 per cent respectively as on December 31, 2019.
Capital ratios improved
The capital infusion and write-down of additional Tier I bonds (AT1) helped improve the bank’s CET I and CAR ratio to 6.3 per cent and 8.5 per cent respectively as on March 31, 2020, though, the same was still below the regulatory requirements.
The bank has further raised Rs15,000 crore through follow-on public offer (FPO) in July 2020, which has helped the bank improve its capital ratios.
Thus, CET I, Tier I and CAR ratios stood at 13.5 per cent, 13.6 per cent and 19.9 per cent respectively as on September 30, 2020.
SBI holds 30 pc
Currently, the bank has a strong shareholder base with State Bank of India (SBI) holding 30 per cent stake (as on September 30, 2020) and the bank has an experienced board of directors with Prashant Kumar as the managing director and chief executive officer (MD & CEO).
The rating is however constrained by the weak asset quality, impacting the profitability and moderate resource profile of the bank.
The gross non-performing assets (NPAs) and net NPAs stood at 16.9 per cent and 4.7 per cent respectively as on September, 30, 2020. Brickwork believes the ability of the bank to control slippages on account of COVID-19 related stress is a key monitorable.
The bank had seen a sizable decline in deposits with total deposits reducing from Rs2,27,610 crore as on March 31, 2019 to Rs 1,05,364 crore as on March 31, 2020.
However, the bank has been able to increase its deposits during H1 FY21, and total deposits stood at Rs1,35,815 crore as on September 30, 2020.
“The ability of the bank to maintain a retail and sustainable deposit base is a key monitorable,” Brickwork noted
