Yes Bank Limited (the "Bank") has received its first credit rating coverage from S&P Global Ratings. The agency has assigned a long-term issuer credit rating of 'BB+' with a Stable outlook and a short-term issuer credit rating of 'B'. This rating reflects S&P's expectation of extraordinary support from Sumitomo Mitsui Banking Corp. (SMBC), given Yes Bank's status as a moderately strategically important affiliate. S&P believes SMBC will provide support if Yes Bank faces financial stress, acknowledging India as a high priority growth corridor for SMBC. The bank is expected to benefit from SMBC's strategic influence, including board representation and the sharing of global best practices in risk, audit, IT, finance, and compliance. SMBC became the largest shareholder of Yes Bank in 2025, acquiring a 24.9% stake. S&P's assessment of Yes Bank's standalone credit profile (SACP) is 'bb'. The bank's capitalization is considered adequate, and it is projected to gradually improve profitability, asset quality, and funding, while increasing its market share over the next one to two years. The stable outlook is based on the expectation of ongoing support from SMBC and gradual improvements in the bank's financial metrics, with capitalization expected to remain adequate despite higher loan growth. Yes Bank's business position is characterized by a modest market share (approximately 1.2% in loans and 1.3% in deposits as of late 2025) and low profitability, with a return on assets of 0.8% for fiscal 2026, lagging the industry average. However, the bank's association with SMBC is expected to enhance business opportunities through client referrals and loan syndication. The bank's capitalization is expected to be supported by steady internal capital generation, with its risk-adjusted capital (RAC) ratio projected to stabilize between 8.0%-8.5% through fiscal 2027-2028. Profitability is expected to rise moderately, with a return on assets likely to exceed 0.9% by fiscal 2028 and net interest margins improving by approximately 30 basis points over the next two fiscal years. Funding costs are anticipated to decrease with an improvement in the CASA deposit ratio and potential access to other funding sources via SMBC. While portfolio granularity has improved, unsecured retail slippage remains elevated due to rapid growth in unsecured lending. However, recent corrective actions have led to improved slippages. Credit growth is projected at 14%-15% for fiscal 2027-2028. Credit costs are expected to remain below the industry average, supported by recoveries from legacy security receipts. Yes Bank has rebalanced its loan portfolio towards retail and SME segments. Its underwriting standards are improving, with gross nonperforming loans at 1.3% as of end-March 2026. Retail deposits have increased, and the CASA ratio improved to 35%, though wholesale funding remains higher than peers. Depositor concentration is also noted as a factor.
