Ba2 Upgrade! Yes Bank Wins Moody’s Confidence—But Is There More to the Story?

Moody's Ratings upgraded Yes Bank's long-term foreign currency issuer rating to Ba2 from Ba3 due to its stronger financial strength, and capital, the ratings agency added. The outlook has been revised to stable, based on expectations of additional recovery and expansion.

Key Highlights:

- Rating Upgrade: Yes Bank improves from Ba3 to Ba2

- Outlook Change: From positive to stable

- Reason for Upgrade: Stronger capital base and improved asset quality

- Profitability Projections: To improve in the coming 12-18 months

- Challenges: Higher cost of funds than peers

Moody's highlighted that Yes Bank's depositor base and lending franchise have expanded, which has favored it with enhanced profitability. The bank's NPL ratio also fell to 1.7% as of March 2024 from 2.2% during the previous year.

Despite these advancements, Moody's cautioned that Yes Bank's funding costs continue to be high, and profitability lags other Indian banks. However, the agency expects steady improvement as the bank streamlines its lending strategy and reverses stressed assets.

This upgrade indicates enhanced investor confidence in the Yes Bank turnaround plan, which strengthens its position in India's banking sector.

Source: Business Standard, Economic Times, Financial Express