Moody's downgraded India-based Yes Bank Ltd.'s long-term issuer and deposit ratings to Ba3 from Ba1, with a negative outlook.
The ratings action concludes the rating agency's review for downgrade initiated in June.
In addition, the ratings agency downgraded the bank's baseline credit assessment and adjusted BCA to "b1" from "ba2."
Moody's said the downgrade reflects the lower-than-expected amount of capital raised by Yes Bank in its recent share sale and the risk that the substantial decline in the bank's share price will affect its ability to raise sufficient capital to maintain its ratings at the previous level. It expects the majority of the bank's operating profits to be channeled toward loan-loss provisions over the next 12-18 months, leaving it dependent on external capital raising to improve its loss-absorbing buffers.
The agency added that the bank's funding and liquidity profile is stable, but it compares weakly to other rated private sector peers in India.
The negative outlook mainly reflects the risk of further deterioration in the bank's solvency, funding or liquidity, as it faces asset quality issues and rebuilds loss-absorbing buffers.
