Yes Bank gets a credit rating upgrade post licence to run Mutual Fund; Where does it lead the bank?

“This rating upgrade will result in further reduction in our cost of borrowings going forward, and further widens the depositors, stakeholders universe of YES Bank,” added Kapoor.

Representational Image: Photo: Reuters

India’s fourth largest private lender Yes Bank announced that it has received the final regulatory approval (Certificate of Registration) from the Securities & Exchange Board of India (SEBI) to commence its Mutual Fund business. This approval subsequent to the Reserve Bank of India’s (RBI) approval granted to YES BANK to sponsor a Mutual Fund followed by SEBI’s in-principle approval received subsequently. Right after when Yes Bank announced it’s plan for mutual fund industry, Care Ratings upgraded the credit rating highlight the strong business portfolio it carries. The share price of Yes Bank finished at Rs 352.40 per piece higher by 1.03% on BSE.

For the first time, Care Ratings has upgraded Yes Bank to 'AAA' considering the following drivers amongst others towards the ratings upgrade:

Adequate capitalization levels
Experienced senior management
Healthy profitability, consistently over the last decade
Comfortable asset quality relative to other banks, and relatively low exposure to NCLT cases.
Improvement in funding profile
Comfortable liquidity profile, improvement over previous years specifically on the reliance on wholesale deposits

Rana Kapoor, MD & CEO, YES BANK said. “This rating upgrade from CARE Ratings is a reflection of YES BANK’s sustainable growth oriented business model coupled with robust risk management policies, demonstrated and proven track record in asset quality preservation, rapidly growing Branch Banking presence and a strong execution focused management team.”

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“This rating upgrade will result in further reduction in our cost of borrowings going forward, and further widens the depositors, stakeholders universe of YES Bank,” added Kapoor.

On mutual fund licence and credit ratings of Yes Bank, Nilanjan Karfa and Harshit Toshniwal analysts at Jefferies said, “ we don't expect any impact on the earnings trajectory and in the ensuing period may even slow down its third-part distribution fee (linked to mutual fund), we believe the positioning of the bank being able to cater to retail requirements (investments other than lending) inhouse will continue to improve and strengthen its retail consumer base.”

The duo added, “We also wonder whether the licence from one of the regulators (SEBI in this case) helps assuage the Street's concern, even if partially, around the re-appointment of Rana Kapoor as MD & CEO - the term expires on 31 Aug 2018.”

They also said, “ After all, we believe, SEBI would have also sought a tacit RBI's approval, given that a bank is floating a mutual fund where public money is going to be invested and any negatives would have been flagged.”

Yes Bank’s mutual fund

According to Kapoor, YES Asset Management (India) Limited (‘YAMIL’) will leverage YES BANK’s Knowledge Banking expertise and relationship capital across retail, corporate and institutional investors to effectively channelize their assets in equity and debt capital markets.

YAMIL will operate out of the YES BANK Group Headquarters at YES BANK Tower, Lower Parel Innovation District, Mumbai. The operational set-up for YAMIL including a robust technology architecture, partnerships for Fund Accounting & Custodian Services and Registrar & Transfer Agent services is already in place.

The migration of this differentiated sectoral knowledge will allow YES Asset Management (India) Limited, a wholly owned subsidiary of YES BANK, to launch fund offerings across the spectrum of both Debt & Equity markets over the next 6-12 months.

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