YES Bank CRISIL Rating Upgrade: Long-Term Rating Raised to AA+/Stable

What Happened ?

YES Bank informed the stock exchanges that CRISIL Ratings upgraded the bank’s long-term ratings on Infrastructure Bonds and Basel III Tier II Bonds to CRISIL AA+/Stable while reaffirming the CRISIL A1+ rating for Certificates of Deposit.

CRISIL attributed the upgrade to the bank’s improving financial profile, strengthening liability franchise, stable asset quality, and revised analytical approach that factors in ongoing support from SMBC, the bank’s largest shareholder.  

key details

Rating Upgrade Highlights:

• Infrastructure Bonds upgraded from CRISIL AA-/Stable to CRISIL AA+/Stable.
• Basel III Tier II Bonds upgraded from CRISIL AA-/Stable to CRISIL AA+/Stable.
• Certificates of Deposit rating reaffirmed at CRISIL A1+.
• Ratings withdrawn on fully redeemed Tier II Bonds totaling ₹3,345 crore in line with CRISIL’s withdrawal policy.

Key Reasons Behind the Upgrade:

• Consistent improvement in profitability over the past several years.
• Return on Assets improved to 0.9% during Q1 FY27.
• Lower cost of deposits strengthened the liability franchise.
• Asset quality remained stable with Gross NPA at 1.3%.
• Comfortable capitalisation with 15.1% overall capital adequacy ratio.
• Improved earnings supported by lower credit costs and recoveries.
• Revised analytical approach incorporates expected strategic support from SMBC, which owns 24.9% of YES Bank.
• SMBC’s involvement through Board representation, governance support, and potential business synergies strengthened the bank’s overall credit profile.  

Note:

• CRISIL expects YES Bank to continue benefiting from SMBC’s financial, managerial, operational, and strategic support while maintaining stable asset quality, improving profitability, and a healthy deposit franchise. The rating outlook remains Stable.

Risk Analysis

Summary:

• The rating action is positive, but CRISIL highlighted that sustaining profitability, maintaining asset quality, and preserving SMBC’s strategic commitment remain key rating sensitivities.

Key Risks:

• Reduction in SMBC’s shareholding or strategic importance.
• Deterioration in asset quality leading to weaker profitability.
• Failure to sustain improvement in Return on Assets.
• Continued competition in retail and SME lending.

Worst Case:

• A significant deterioration in profitability or asset quality, or reduced strategic support from SMBC, could result in negative rating action in the future. 

Risk Level: Low

Company Commentary

• YES Bank informed exchanges that CRISIL upgraded its long-term ratings and reaffirmed its short-term rating.
• CRISIL stated that the upgrade reflects the bank’s improved financial profile and expectation of continued support from SMBC.
• The rating agency also expects YES Bank to maintain stable deposits, healthy asset quality, comfortable capitalisation, and gradually improving profitability over the medium term.