Moody's Investors Service placed Yes Bank Ltd.'s credit ratings under review for downgrade due to its exposure to mortgage and non-bank lenders and the real estate sector amid a liquidity crunch.
The review for downgrade takes into account Moody's expectation that the ongoing liquidity pressures on Indian finance companies will negatively impact the credit profile of Yes Bank, given the bank's sizeable exposure to weaker companies in the sector, the rating company said in a statement.
Yes Bank had a 6.4 percent exposure to housing finance and non-banking finance companies as of March, Moody's said. The lender had a 7 percent direct exposure to the commercial and residential real estate sector, which is going through a turbulent period of liquidity crunch just like mortgage and non-bank lenders, it said.
Moody's placed under review for downgrade the bank's:
- Foreign currency issuer, long-term foreign and local currency bank deposit ratings of Ba1.
- Foreign currency senior unsecured medium-term note program rating of (P)Ba1.
- Baseline credit assessment and adjusted BCA of ba2.
It said Yes Bank's counterparty risk assessment of Baa3(cr)/P-3(cr) and domestic and foreign currency counterparty risk rating of Baa3/P-3 is also under the review for downgrade. It affirmed Yes Bank's short-term foreign and local currency bank deposit rating of ‘not prime'.
This comes more than a month after ICRA Ltd. downgraded the bank and India Ratings lowered the lender's long-term ratings on concerns of some of its loan exposure turning into bad loans.
In April, Moody's said the bank classified about Rs 10,000 crore worth of its exposures, representing 4.1 percent of its total loans, under the watchlist and that could translate into non-performing loans over the next 12 months. The bank had reported its maiden loss of over Rs 1,506 crore in the quarter ended March, driven by a near 10-fold spike in provisions against bad loans.
Moody's expects a significant pressure on the bank's asset quality, profitability and capital position.
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