Yes Bank Still Requires Up To Rs 13,000 Crore In 1-2 Years, ICRA Says

Yes Bank Ltd. will require up to Rs 13,000 crore in the next couple of years, despite its private lending peers and India’s largest bank rescuing it from a crisis, ICRA Ltd. said.

While equity infusion and writedown of Additional Tier-I bonds will aid the lender's capital ratios, it will need additional funding to maintain its Capital Conservation Buffer at the mandated 2.5 percent, as on March 31, 2020, the rating agency said in a release.

The equity infusion and writedown of bonds has improved Yes Bank’s Common Equity Tier-1 (CET-1) and Tier-1 ratios to 7.6 percent and 7.8 percent, respectively, and capital-to-risk weighted assets ratio to more than 9 percent, ICRA said.

The bank has not paid a coupon, which was due on the Basel-II Tier-1 bonds on March 5, 2020, as the same is subject to approval from the Reserve Bank of India.

The ratings agency has upgraded various bond programmes of Yes Bank and placed a ratings watch on them with developing implications—factoring in the removal of the moratorium on March 18, infusion of Rs 10,000-crore equity capital, reconstitution of the company's board and writedown of AT-1 bonds.

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"ICRA derives comfort from the new shareholding and the reconstitution of the bank's board. Along with the equity infusion of Rs 10,000 crore, YBL's Basel-III Additional Tier-1 (AT-I) Bonds of Rs 8,415 crore have been written down. "This has helped improve the Tier-1 capital ratios above the regulatory requirements (excluding CCBs)."

Yes Bank may however witness deposit withdrawals for which liquidity support is to be provided by domestic financial institutions and RBI, if required, the ratings agency said.

The bank's deposit base stood at Rs 1.37 lakh crore on March 5, when the moratorium was implemented. It is likely to erode further in the near term, following the removal of the moratorium on March 18, ICRA said. As on Dec. 31, 2019, Yes Bank had a deposit base of Rs 1.66 lakh crore down from Rs 2.09 lakh crore on Sept. 30, 2019.

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Positive Triggers

"ICRA could revise the outlook to positive or upgrade the ratings if Yes Bank is able to raise sufficient capital to meet the regulatory capital ratios (including CCB) on a sustained basis," the ratings agency said in the statement.

Stabilisation of the deposit base, continued improvement in the customer franchise by improving the share of retail deposits, and the ability to generate capital internally will be key triggers.

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Negative Triggers

A sustained decline in the scale of operations, leading to a delayed improvement in the operating profitability, and the inability to reduce reliance on wholesale funding over the medium-term will be key negative triggers, ICRA said.

"Yes Bank’s inability to raise sufficient capital to meet the regulatory ratios (including CCB) on a sustained basis will also be a credit negative," it said further.

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On Wednesday, Yes Bank shares fell 15.86 percent to Rs 29.45 apiece on the NSE while the benchmark Nifty 50 index gained 6.62 percent to end the day at 8,317.85 points.