Yes Bank Ltd shares dropped nearly 4% in intra-day trade on Thursday, i.e. 7 November, after global ratings agency Moody’s placed the bank’s ratings under review for downgrade.
At 12:45 pm, shares of Yes Bank were trading at Rs 67.70, down 1.5%, after hitting the day’s low of Rs 66. Though the stock has lost 70% in the last one year, it has recovered nearly 110% from the record low seen in October.
Moody’s on Wednesday said that Yes Bank’s Ba3 rating can be downgraded because of the weak September quarter earnings and the bank managing to get only a commitment for $1.2 billion in funding recently.
“The bank's weakening financial position can be somewhat offset by the planned capital raising. Nevertheless, there are significant execution risks around the timing, price and regulatory approvals required,” Moody’s noted, adding that a rating downgrade was possible if Yes Bank fails to raise the capital or if the quantum of dud loans rose or because of a deterioration in the liquidity position.
Moody’s also said that it expected the bank’s total dud asset to exceed 12% in the year 2019 basing on the bank’s own assessment of over 40% of its Rs 30,000 crore of exposure to lower-rated entities turning sour before March.
The ratings agency also ruled out any chances of upgrade for Yes Bank in the next 12-18 months, saying the outlook can be changed to ‘stable’ if the asset quality is stable and the banks manages to raise capital.
Yes Bank shares had witnessed an uptick earlier this week on news that ace stock market investor Rakesh Jhunjhunwala had bought nearly 13 million shares in the private lender, which translated to around 0.5% stake in the bank, on 4 November through open market transactions.