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Yes Bank’s shares surged by over 7% today following an optimistic outlook upgrade from global ratings agency Moody’s. The positive revision in outlook from ‘stable’ to ‘positive’ was driven by expectations of improvement in the bank’s depositor base and lending franchise. Moody’s also affirmed Yes Bank’s long-term foreign currency and local currency deposit ratings at ‘Ba3’. They anticipate the bank’s core profitability to improve gradually over the next 12-18 months. The lender’s deposits witnessed a significant growth of 10.3% in FY23 and 22.5% in FY24, with CASA deposits accounting for 40% of the total deposits as of March 2024.
Furthermore, Moody’s noted a notable improvement in Yes Bank’s asset quality, with the non-performing loan ratio declining to 1.7% as of March 31, 2024. The positive outlook excludes the possibility of a ratings downgrade for Yes Bank in the upcoming 12-18 months, provided its asset quality and profitability remain stable. However, there is a caution regarding the potential for a downgrade if the bank’s asset quality deteriorates significantly.
Moreover, reports of a potential stake sale at Yes Bank have been circulating, indicating a possible change in majority ownership. Despite denying the reports, the bank’s major shareholder, State Bank of India, is reportedly looking to divest its entire 24% stake. First Abu Dhabi Bank is among the potential bidders for a $5 billion stake in Yes Bank, with preliminary interest also seen from Japanese banks like Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group.
As a result of the positive news, Yes Bank’s share price surged to Rs 26.70 in morning trade, marking an 18% gain year-to-date. The stock has outperformed its peers like HDFC Bank and Kotak Mahindra Bank. With the bank’s improved performance and positive outlook, investors are optimistic about Yes Bank’s potential growth and stability in the near future.
