Moody’s places YES Bank rat­ings un­der re­view for down­grade

In­de­pen­dent direc­tor Mukesh Sab­har­wal quits bank board

The Hindu Business Line - - BANKING -

In a fur­ther set­back to YES Bank, Moody’s placed its rat­ings un­der re­view for a down­grade. In a sep­a­rate de­vel­op­ment, non-ex­ec­u­tive in­de­pen­dent direc­tor Mukesh Sab­har­wal has re­signed from the bank’s board.

Mean­while, the RBI said it has im­posed a penalty of ₹11.25 lakh on the pri­vate sec­tor lender for non­com­pli­ance with pre­paid pay­ment in­stru­ment norms.

An­nual gen­eral meet­ing

These de­vel­op­ments come a day ahead of YES Bank’s an­nual gen­eral meet­ing. Global rat­ings agency Moody’s raised con­cerns over the high exposure of the pri­vate sec­tor lender to the strug­gling NBFC and real es­tate sec­tors.

“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 agency said in a state­ment on Tues­day.

At the end of March 2019, YES Bank’s exposure to hous­ing fi­nance com­pa­nies and NBFCs rep­re­sented 6.4 per cent of its to­tal exposure, and it had a 7 per cent di­rect exposure to the com­mer­cial and res­i­den­tial real es­tate sec­tor at the time, it fur­ther noted, adding that both the sec­tors are un­der pres­sure due to tight liq­uid­ity con­di­tions.

The bank, un­der its new Manag­ing Direc­tor and CEO Ravneet Gill, had re­ported a net loss of ₹1,507 crore in the quar­ter ended March 31, 2019, and had clas­si­fied ₹10,000 crore of its to­tal loans un­der a watch­list, which could turn non-per­form­ing over the next 12 months.

Moody’s said it ex­pects sig­nif­i­cant pres­sure on the bank’s as­set qual­ity, prof­itabil­ity and cap­i­tal po­si­tion due to these head­winds, but said the proac­tive pro­vi­sion­ing in the March quar­ter will cush­ion the im­pact of the an­tic­i­pated stress.

It also warned that YES Bank’s loss-ab­sorb­ing ca­pac­ity and fi­nan­cial pro­file will be un­der more pres­sure if it is un­able to raise the board-ap­proved cap­i­tal of $1 bil­lion.

“In Moody’s opin­ion, given the re­cent changes at the bank, its cor­po­rate be­hav­iour can grad­u­ally im­prove,” it said, not­ing that its neg­a­tive ad­just­ment takes into ac­count the man­age­ment’s ag­gres­sive loan growth strat­egy and iden­ti­fi­ca­tion of lapses by the Re­serve Bank of In­dia.

Sab­har­wal res­ig­na­tion

Mean­while, in a reg­u­la­tory fil­ing on the stock ex­changes, YES Bank said that its non-ex­ec­u­tive in­de­pen­dent direc­tor Mukesh Sab­har­wal has re­signed from the board as “he wants to de­vote qual­ity time on his aca­demic pur­suits”.

This is the sec­ond such res­ig­na­tion from the bank’s board in re­cent days. On Mon­day, the lender said that Ajai Ku­mar, a non-ex­ec­u­tive non-in­de­pen­dent direc­tor, had re­signed with im­me­di­ate ef­fect due to per­sonal rea­sons.

Sab­har­wal was ap­pointed as in­de­pen­dent direc­tor and has spent over seven years with YES Bank since April 25, 2012. The bank has pro­posed his re-ap­point­ment as in­de­pen­dent direc­tor un­til April 24, 2020, which will also be taken up at the AGM.

An­a­lysts are once again con­cerned after the lat­est de­vel­op­ments at the bank.

Lal­itabh Shri­vastawa, AVP, Re­search, Sharekhan by BNP Paribas, said: “The re­cent res­ig­na­tion of board mem­bers of YES Bank adds to the grow­ing num­ber of board mem­ber ex­its seen since last year. Cou­pled with the re­cent rat­ing down­grades, we be­lieve it is an over­hang on the stock per­for­mance. We opine it is a con­cern.”

The lender’s scrip gained 2.5 per cent and closed at ₹139.30 apiece on the BSE.

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