Moody’s Ratings has reaffirmed Yes Bank’s long-term deposit ratings at Ba1, maintaining a stable outlook. This follows the Supreme Court’s recent decision to reinstate the bank’s AT1 securities, which is expected to lower the pro-forma CET1 ratio to 11.4%. While capital buffers face pressure, Moody’s anticipates the bank will initiate equity-raising plans to support growth and maintain regulatory stability.
Yes Bank Ratings Affirmed by Moody's Following Supreme Court Verdict
Moody’s Ratings has affirmed Yes Bank Limited’s long-term foreign and local currency deposit ratings at Ba1, maintaining a stable outlook for the lender. This decision comes shortly after the Supreme Court of India ordered the reinstatement of the bank’s Additional Tier 1 (AT1) securities.
Reader Takeaway: Ratings stability is maintained, but investors should watch for upcoming equity capital raises to replenish buffers.
What just happened
Moody’s has reaffirmed the bank’s Baseline Credit Assessment (BCA) at ba2 and long-term deposit ratings at Ba1. This follows the Supreme Court’s October 15, 2026, ruling that set aside the 2020 write-down of AT1 securities, mandating their reinstatement. The bank has indicated this will lead to a pro-forma decline in its CET1 ratio from 13.7% to 11.4% as of September 2026.
Why this matters
The reinstatement of the AT1 securities directly impacts the bank’s capital structure. While the Tier 1 capital ratio remains supported by these instruments, the reduction in the CET1 ratio necessitates a clear strategy for capital replenishment. Moody’s expects the management to raise sufficient new equity to support future loan growth and ensure the capital position remains robust.
Operating Performance
Despite the regulatory developments, the bank has shown improvements in core operations:
- Asset Quality: Gross nonperforming loan ratio improved to 1.2% by September 2026.
- Profitability: Annualised net income to tangible assets reached 0.8% for the half-year ended September 2026, up from 0.7% previously.
- Liquidity: Core banking liquidity remains steady, with high-quality liquid assets at 17.9% of tangible banking assets.
Risks to watch
Moody’s highlighted several areas of concern that could influence future credit assessments. Specifically, if the TCE/RWA ratio falls below 11% without a credible capital-raising plan, the bank could face a potential downgrade. Other risks include the normalization of provisioning costs as legacy recoveries slow and the unseasoned risk profile associated with aggressive retail and SME lending growth via third-party channels.
What to track next
Investors should closely monitor the bank's forthcoming announcements regarding equity fundraising plans. Maintaining sufficient capital buffers is the primary factor supporting the current stable outlook. Additionally, the bank’s ability to stabilize its deposit franchise and manage funding costs relative to its larger private sector peers will remain a key performance metric.