Yes Bank stocks hit upper circuit for the second-day straight as CARE upgrades debt ratings

Yes Bank’s share price jumped 5% to hit the upper circuit for the second day straight on Tuesday. Stocks of the private sector lender zoomed higher after rating agency CARE Ratings announced that it has upgraded the ratings assigned to certain debt instruments issued by Yes Bank. Shares of the lender have now surged 10.35% in the last two days to now trade at Rs 13.54 per share. Despite this, the stock is down 77% from its March highs, when the bank was restructured by the RBI and State Bank of India.

CARE Ratings has upgraded Yes Bank’s Rs 5,000 crore infrastructure bonds to CARE BBB rating and removed the bonds from credit watch. Similarly Lower Tier II bonds worth Rs 2,230.60 crore have been upgraded to CARE BBB rating. The Tier II Bonds (Basel III) worth Rs 8,900 crore have been upgraded to CARE BBB rating with a stable outlook from the CARE C rating which is considered to be for very high risk debt instruments. Upper Tier II  Bonds and Perpetual Bonds (Basel II)  have been upgraded to CARE BB+ from the junk category.

Earlier last month in its July-September quarter results, Yes Bank reported a 185% on-quarter increase in net profit. Quarterly results hint at improving trends at Yes Bank with deposits growing 16% from the previous quarter, helped by corporate/bulk deposits. Advances have also been improving sequentially to Rs 1.67 lakh crore in the previous quarter. Yes Bank has raised NPL covers to around 75% and Covid-19 provisions at over 1%. However, despite the improving trends analysts are still cautious about Yes Bank.

“Risk-reward remains unfavourable and we believe that many superior large banks available at attractive valuations,” said Emkay Global earlier last month. Emkay Global has a sell rating on the stock. Edelweiss has the stock under review adding that there are initial signs of recovery, but uncertainty around incremental corporate book stress remains an issue. Brokerage and Research firm Anand Rathi has a ‘Hold’ call on Yes Bank. “With earnings expected to pick up in FY22 and limited downside from current levels,” they said.