Icra has downgraded Yes Bank’s long-term ratings while offering a negative outlook — a fresh jolt to the private sector lender after its disappointing March-quarter results.
The credit rating agency cut the ratings on six instruments totalling borrowings of over Rs 33,000 crore by the lender, after it reported a surge in BB and below-rated advances in the March 2019 quarter to 7.1 per cent under the new chief executive Ranveer Gill.
In November last year, Icra had downgraded the long-term ratings of the bank and had kept it on “watch with negative implications” wherein the bank’s ability to maintain its asset quality and improve the core equity capital cushion was highlighted as a key rating sensitivity.
Last week, Yes Bank reported its maiden loss of over Rs 1,506 crore in the March quarter, driven by a near ten-fold spike in provisions.
The bank has set aside a large sum of Rs 2,100 crore as contingent provisions and also guided towards an elevated capital cost of 1.25 per cent in 2019-20. This, Icra said, is expected to translate into a moderation in earnings in the near term.
The outlook on the ratings, too, continues to be negative. “With a sizeable increase in the share of BB and below-rated advances and the weakened capital cushions, rating outlook remains negative,” Icra said.
Anil firms
Icra has also downgraded the short-term ratings of two entities of the Anil Ambani-led Reliance Capital — Reliance Home Finance and Reliance Commercial Finance.
For Reliance Home Finance, where the agency has an outstanding rating on a Rs 1,200 crore commercial paper (CP) programme, the rating has been downgraded to junk grade of D from A4 with rating watch on negative implications. Reliance Commercial Finance’s CPs have also been downgraded to D from A4.
Some of Canara Bank’s debt instruments have also been downgraded by Icra. In a filing to the BSE, the bank said ratings on its additional tier-I bonds worth Rs 1,500 crore have been downgraded to AA-, with a stable outlook, from AA with negative outlook. Icra rating on tier-II bonds worth Rs 7,900 crore has been downgraded to AA+ with a stable outlook, from AAA with a negative outlook.