Japan Credit Rating Agency (JCR) has assigned its inaugural credit ratings to YES Bank Ltd., issuing an A- rating for the bank's foreign currency long-term issuer rating and BBB+ for its foreign and domestic currency issuer ratings. The announcement comes as the agency also noted that YES Bank's capital buffer is expected to narrow following a recent Supreme Court ruling concerning AT1 (Additional Tier 1) bonds.
Capital Buffer Adjustments and Regulatory Compliance
According to JCR, YES Bank's consolidated common equity Tier 1 (CET1) ratio stood at 13.9 percent at the end of fiscal year 2026 and 13.7 percent by the close of the second quarter of fiscal year 2027. However, the bank estimates that its CET1 ratio will decline to 11.4 percent after accounting for the Supreme Court's decision on AT1 bonds, which was issued in October 2026.
Despite this projected reduction, JCR emphasized that the capital buffer is expected to remain comfortably above the regulatory minimum requirement of 8 percent. The rating agency expressed confidence that YES Bank will be able to progressively restore its capital levels through a combination of retained earnings and any subsequent capital raises.
Recovery Trajectory and Strategic Shifts
JCR's assessment highlighted YES Bank's consistent recovery since its performance bottomed out in FY2020. Following a period of reconstruction, the private lender has notably revised its operational strategy, moving away from a purely growth-oriented model to one centered on more prudent risk management. This includes the implementation of stricter credit standards across its lending portfolio.
A key aspect of this strategic shift has been the diversification of its loan book. YES Bank has reduced its exposure to large corporations while increasing the proportion of loans extended to retail customers and small and medium-sized enterprises (SMEs). This rebalancing has enabled the bank to steadily grow its loan balance while effectively managing credit costs.
Financial Performance and Future Outlook
The bank's robust recovery is further evidenced by its financial results, with net profit attributable to shareholders reaching Rs 35.1 billion in FY2026, marking its highest level since the crisis period. Earnings continued their upward trend in the first and second quarters of FY2027, signaling sustained solid performance.
While JCR acknowledged that YES Bank's profitability, as measured by return on assets (ROA) based on pre-provision operating profit (1.2 percent in FY26), remains below that of its peers, it noted a gradual improvement. This enhancement is attributed to factors such as reduced funding costs, a direct result of the bank's strengthened and expanded deposit base, particularly in current account and savings account (CASA) ratios. JCR will continue to monitor the final accounting treatment of the AT1 bonds and the bank's progress in capital restoration.