INSUBCONTINENT EXCLUSIVE:
Moody's Investors Service Thursday affirmed the ratings of Yes Bank, a day after RBI curtailed term of the midsize private lender's promoter
chief executive Rana Kapoor
The rating agency has also maintained the outlook on the ratings as stable
"Yes Bank's profitability is strong, and Moody's expects that the bank can maintain low credit costs over the next 12-18 months," the
global rating agency said in a note
It added that the growth in both the interest and non-interest income will help the city-headquartered bank maintain "solid profitability"
The agency warned that while the bank's current asset quality metrics are strong and superior to that of peers, its "aggressive growth
strategy poses asset risks"
The overall issuer rating, accordingly continues to stand at Baa3, it said, adding that all the other ratings on the bank have been
The bank informed last evening that the Reserve Bank of India (RBI) had curtailed the term of Rana Kapoor, its promoter, chief executive
and managing director, till January 31, 2019, and asked the board to find a replacement
The 61-year-old Kapoor owns over 10 per cent in the bank
Private sector bank chiefs are allowed to continue holding their posts till the age of 70
In August, the bank board had given a three-year extension to Kapoor and sought the central bank's go-ahead for the same
The bank had been found to have under reported non-performing assets (NPAs) by over Rs 10,000 crore for two consecutive years
Moody's said Yes Bank will continue to outpace the industry in loan book growth, but added that while the capital buffers are adequate for
now, it will have to raise capital from the market soon
It said the bank's share in the system-wide assets has increased five times to 2.4 per cent since 2009, which "underpins" its belief that
the government will support it in case needed, and added that its "importance to the Indian banking system is increasing"
If the bank is able to maintain the present asset quality ratios and reduce credit risk concentrations, its share of low-cost Casa (current
account savings account) deposits improves without affecting the margins and profitability is sustained, the agency said the bank's rating
However, an increase in NPAs or decline in earnings can lead to a downgrade in ratings, it said.
