Moody’s affirms Yes Bank’s ratings with stable outlook

Moody’s affirms Yes Bank’s ratings with stable outlook
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Coimbatore, Sep 20: Moody’s Investors Service has affirmed Yes Bank’s foreign currency issuer rating of Baa3. It has also affirmed the bank’s foreign and local currency bank deposit ratings of Baa3/Prime-3 and foreign currency senior unsecured MTN program rating of (P)Baa3.
The agency has affirmed Yes Bank’s baseline credit assessment (BCA) of ba1 and adjusted BCA of ba1 and the bank’s counterparty risk assessment (CR Assessment) of Baa3(cr)/P-3(cr) and domestic currency counterparty risk rating (CRR) of Baa3/P-3.
For the bank’s IFSC Banking Unit Branch, Moody’s has also affirmed the foreign currency senior unsecured MTN program rating of (P)Baa3 and senior unsecured debt rating of Baa3. The outlook on all ratings, as applicable, is stable.
“The affirmation of Yes Bank’s issuer and deposit ratings take into account the bank’s adjusted BCA of ba1 and a one notch uplift to reflect Moody’s assessment of moderate support from the Government of India (Baa2 stable) to the bank in times of need,” the agency said.
“The moderate support assumption reflects the bank’s modest, but rapidly growing franchise, and its relative importance to India’s banking system,” it said.
“The affirmation of the bank’s BCA and adjusted BCA at ba1 takes into account Yes Bank’s improved funding, superior asset quality compared to the other rated Indian banks that are focused on corporate lending and solid profitability,” the agency stated.
“The bank’s funding structure has improved significantly because sticky current and savings accounts (CASA) and retail term deposits have grown, making its liability mix more granular and reducing the bank’s dependence on confidence-sensitive wholesale funding,” Moody’s said.
“Yes Bank’s profitability is strong, and Moody’s expects that the bank can maintain low credit costs over the next 12-18 months. This situation, along with the growth in interest and non-interest income, will help Yes Bank maintain solid profitability,” it said.
“While the bank’s current asset quality metrics are strong and superior to that of its Indian peers, its aggressive growth strategy poses asset risks. Moody’s expects that Yes Bank’s loan growth, at 35%-40% annually, will continue to outpace the industry average of about 10% over the coming 12-18 months,” the agency said.