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Moody's upgrades Yes Bank's rating to Ba3 from B2, changes outlook to stable
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IANS | 05 Aug, 2022
Moody's Investors Services has upgraded Yes Bank's long-term foreign
currency issuer rating and long-term foreign and local currency bank
deposit ratings to Ba3 from B2, a release said.
The bank's Baseline Credit Assessment (BCA) and Adjusted BCA has also been upgraded to b1 from b3.
The rating agency has also changed the outlook on the bank's ratings, where applicable, to stable from positive.
"The
upgrade of Yes Bank's BCA and ratings reflects the bank's planned
equity capital raise, which will support its credit profile and
strengthen its resilience against potential asset quality risks arising
from headwinds such as higher inflation and tighter global financial
conditions," Moody's Investors Service said in a release.
The
bank on July 29, had announced the raising of nearly Rs 8,900 crore
through a mix of shares and warrants to be issued to global private
equity players Carlyle Group and Advent International.
The
capital raise comprises two parts -- Rs 5,100 crore ($640 million) in
equity shares and Rs 3,800 crore ($475 million) through equity share
warrants which can be exercised only after April 1, 2023.
"Moody's
estimates that the first part of the capital raise will result in an
increase of 2.2 percentage points in the bank's consolidated Common
Equity Tier 1 (CET1) ratio from 11.9 per cent as of the end of June
2022, after including profit for the June quarter. The second part of
the capital raise will add another 1.6 percentage points."
On
the flip side, Moody's said given the stable outlook, the bank's ratings
are unlikely to be upgraded over the next 12-18 months.
"Nevertheless,
Moody's could upgrade the ratings and BCA if the bank establishes a
credible and sustainable strategy to improve profitability, without
compromising its asset quality and capital."
The global rater
said it can downgrade the ratings on the lender in case there is a
significant deterioration in its asset quality, which can lead to
erosion of profitability and capital, or even if the turnaround of the
bank fails because of an aggressive financial strategy and risk
management.
Specifically, a decline in the total common equity to
risk weighted assets below 6 per cent and net income/tangible assets
below 0.5 per cent will exert negative pressure on the BCA. Any
weakening in Yes Bank's funding and liquidity will also be negative, it
said.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
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64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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