Yes Bank ratings reflect strong financial performance

Yes Bank was assigned a bank financial strength rating of D+ as well as a Baa3 long-term and Prime-3 short-term global local-currency deposit ratings and Ba1 long-term and Not Prime short-term foreign-currency deposit ratings, which are constrained by the corresponding sovereign ceiling.

The outlook on all ratings is stable.This is the first time Moody's has assigned ratings to YBL.

The D+ BFSR Ba1, reflects YBL's solid financial position and relatively small, but rapidly growing, franchise as India's fourth-largest private-sector bank.

The rating also reflects its short track-record of strong financial performance and its very high loan growth that could carry potential risks, which may become apparent over time.

The assigned ratings also capture Moody's view of Yes Bank's good profitability, strong risk management demonstrated by its better-than-average asset quality, low level of non-performing loans and high provisioning coverage. Yes bank's funding is mainly geared towards corporate fixed deposits, although its liquidity profile is comfortable due to its relatively short-term loan book and sizeable government securities portfolio.

Lower cost current accounts and savings accounts is an area where Yes Bank lags behind its private-sector peers.

Concurrently, Moody's also notes that, similar to other rated Indian banks, Yes Bank is highly exposed to the Indian sovereign, currently rated Ba1 with a positive outlook, and is faced with a degree of interest-rate risk, due to its mandatory portfolio of fixed-rate government securities. YBL's capitalisation is strong, with a Capital Adequacy Ratio of 19.4 per cent, of which Tier 1 represents 11 per cent as of September 2010, although it consumes capital relatively quickly given its very high growth rates in recent years and its medium-term business plans. That said, Moody's acknowledges YBL's proven ability to make new equity offerings at regular intervals.

Yes Bank's Ba1/Not Prime foreign-currency deposit ratings are constrained by the corresponding sovereign ceiling for India considering the bank's global local currency deposit ratings of Baa3/Prime-3, which are also proxy ratings for the bank's senior unsecured debt in both local and foreign currency, Moody's concludes.