Yes Bank surges 5% after Icra upgrades ratings on debt instruments

• The rating agency said the rating upgrade factors in the sizeable capital raise of ₹15,000 crore in July, which has resulted in an improvement in the capital ratios of Yes Bank

Mumbai: Shares of Yes Bank rose as much as 5% on Monday as domestic credit rating agency Icra upgraded its ratings assigned to various debt instruments of the private sector lender.

At 12:30 pm, Yes Bank shares were at ₹14.97, up 2.5% from its previous close on the BSE, while the benchmark index, Sensex gained 0.66% to 39,111.53.

Icra upgraded Yes Bank's infrastructure bonds and Basel II-compliant lower tier II bonds to BBB (stable) from BB+ (rating watch). Its Basel III-compliant tier II bonds were upgraded to BBB- from BB and its Basel II-compliant tier I bonds and upper tier-II bonds were upgraded to BB+ (stable) from a default (D) rating, Yes Bank said in a filing. The announcement was made after market hours on Friday.

The rating agency said the rating upgrade factors in the sizeable capital raise of ₹15,000 crore in July, which has resulted in an improvement in the capital ratios of Yes Bank. The ratios are now comfortably above the regulatory levels, it said.

The capital raise follows the government-approved reconstruction scheme implemented in Q4, under which equity capital of ₹10,000 crore from SBI and other domestic institutions was infused into the bank. Icra added that the rating upgrade also factors in the improvement in the bank's liquidity position after the stability and subsequent increase in its deposit base.

While the improvement in the capital position remains a key positive for the bank, the covid-19-induced stress on the residual corporate book as on 30 June 2020 are likely to keep the credit costs at elevated levels in the near term, Icra said. The management has guided towards a slippage of around 5% in FY21. Despite having the flexibility to restructure loans, Icra estimates that the slippages and credit costs will remain high in a stress scenario.

Yes Bank has fully repaid ₹50,000 crore towards the Special Liquidity Facility (SLF) extended by the Reserve Bank of India (RBI), well before the due date.

The bank's net profit tumbled 60% to ₹45 crore in Q1 FY21 from ₹114 crore in Q1 FY20. However, the bank has returned to profitability after reporting loss in the past three quarters. It had reported a net loss of ₹3,668 crore in Q4 FY20. Total income of the bank fell 32.8% year-on-year to ₹6,106.74 crore in the June.