CARE Ratings upgrades LT rating of Yes Bank to 'A+' with 'stable' outlook

The agency has also affirmed the company's short-term rating at 'CARE A1+'.

CARE Ratings stated that the revision in the ratings assigned to the debt instruments of Yes Bank (YBL) factor in continued growth in advances with improvement in proportion of retail lending and small & medium enterprises (SME) leading to more granular book, reduction in higher ticket corporate lending.

Growth in advances was supported by the relatively higher growth in deposits improving its CD ratio, while maintaining the stable current account and savings account (CASA) deposits.

Rating also factors in adequate capitalisation level supported by receipt of Rs 2,845 crore towards conversion of share warrants during Q1 FY25 (refers to the period from April 01 to June 30) and and improvement in the asset quality parameters on account of lower incremental slippage and sale of non-performing assets (NPAs) to Asset Reconstruction Company (ARC).

The ratings continue to factor in the improvement in the credit risk profile of the bank post the implementation of the reconstruction scheme.

The ratings are constrained due to continued dependence on wholesale/bulk deposits and although the bank has shifted focus on retail and SME loans, the track record remains limited which needs to be monitored over a period of time.

Additionally bank continues to have PSL shortfall leading to higher RIDF deposits which have affected the profitability of the bank. Further, the proportion of stressed assets remains relatively higher.

The bank has seen recoveries and upgrades from bad accounts which have offset the slippages during FY24, keeping NPA levels stable in absolute terms.

While the bank has been making provisions to increase its provision coverage, which has kept the credit costs elevated and profitability moderate, the ability of the bank to maintain the asset quality once the performance of the relatively new retail products is established, would be a key rating monitorable.

Yes Bank is a new generation private sector bank. As on March 31, 2024, the bank had 1,234 branches, 219 BC managed banking outlets and 1,290 ATMs, CRMs and BNAs.

The scrip shed 0.13% to currently trade at Rs 23.48 on the BSE.