Sumitomo-backed Yes Bank pegs AT1 bond verdict hit at Rs 5,217 crore
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Yes Bank's reported profit for the September quarter could have turned into a loss due to the AT1 bond ruling. The bank's CET-1 ratio would drop significantly if the Supreme Court's decision is fully implemented. Investors are concerned as mutual funds pause investments in the bank's AT1 bonds. Yes Bank is assessing the legal and financial implications of the Supreme Court's judgment.
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Loading...×Yes Bank said in its Q2 investor presentation filed with the stock exchanges that it would have posted a loss of Rs 5,217 crore ($549 million) in the fiscal second quarter had it recognised the impact of the Supreme Court verdict overturning the write-off of its AT1 bonds.The lender, 24.9% owned by Japan’s Sumitomo Mitsui Banking Corporation, reported a net profit of Rs 1,080 crore for July-September in the results it announced on Saturday.
The bank said it has not recognised any impact of the judgment in its reported results, as it is yet to complete its assessment.
Also read: SBI helped save YES Bank, Japan came aboard, and now an ₹8,415-crore ghost is crashing its comeback
The bank described the pro forma figures as indicative and unaudited. They are subject to revision based on consequential actions, further legal assessment and the final accounting and regulatory treatment. On this basis, its CET-1 ratio would be 11.4% against the reported 13.7%, and return on assets would be negative 4.3% against 0.9% reported.
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For the April-September half, the pro forma loss would have been Rs 4,146 crore against the reported profit of Rs 2,151 crore, according to a Bloomberg report.
Managing Director and CEO Vinay Tonse said in the press release that the bank respects the Supreme Court’s judgment and is examining it in detail. “We will keep our stakeholders informed as matters progress,” he said. The bank said in the presentation that it is evaluating the consequential actions, the financial and regulatory implications and the legal remedies available to it.
Net profit rose 65% from a year ago and was flat from the June quarter. Operating profit rose 29.4% to Rs 1,678 crore, and net interest income rose 22.7% to Rs 2,822 crore. Gross NPAs fell to 1.2% from 1.6% a year ago.
The bank also said it is evaluating options to strengthen its capital buffers to support growth.
What the Supreme Court ruled
The Supreme Court on Thursday dismissed the appeals against the Bombay High Court order that quashed the 2020 write-off of Rs 8,415 crore of AT1 bonds. According to Bloomberg, the court held that the administrator appointed during the government-backed rescue did not have the authority to extinguish the securities.
Also read: Supreme Court upholds Bombay HC ruling quashing YES Bank's Rs 8,415 crore AT1 bond write-off
Yes Bank's shares have fallen more than 17% since the order, according to Bloomberg. Kotak Mahindra Asset Management and Nippon Life India Asset Management have halted fresh investments in their debt and retirement funds that hold the bank's AT1 bonds, Bloomberg reported. The funds had expected the bonds' value to rise after the ruling.
How Yes Bank collapsed in 2020
Yes Bank was founded in 2004 by Rana Kapoor and Ashok Kapur and grew fast on corporate lending. Over time, concerns over asset quality and governance grew. The RBI assessed the bank's gross NPAs at Rs 8,373.8 crore against the Rs 2,018.6 crore the bank had reported, a gap of Rs 6,355.2 crore. The RBI did not extend Kapoor's term beyond January 31, 2019.
On March 5, 2020, the RBI took control of the bank's board and capped withdrawals at Rs 50,000 per depositor. Former SBI executive Prashant Kumar was appointed administrator.
A reconstruction plan followed with SBI, ICICI Bank, HDFC Ltd, Axis Bank and Kotak Mahindra Bank putting in equity. Shareholders kept their shares, but 75% of the holding of certain investors was locked in for three years.
How the AT1 bonds were written off
Yes Bank had issued Rs 3,000 crore of AT1 bonds in December 2016 at a 9.5% coupon and Rs 5,415 crore in October 2017 at 9%. The administrator wrote all Rs 8,415 crore down to zero on March 14, 2020. Mutual funds and retail investors challenged the decision, and many retail investors said the bonds were mis-sold to them.
On January 20, 2023, the Bombay High Court quashed the write-off. It held that the administrator could not have taken the decision after the bank was reconstituted, and that the final scheme had no provision for writing down AT1 bonds, according to a PTI report at the time. Yes Bank, the RBI and the Centre appealed to the Supreme Court, which stayed the High Court order while it heard the matter.
Capital impact and ownership
Crisil Ratings estimates a full reversal of the write-off would cut the bank's CET-1 ratio by 230-250 basis points. Icra puts it at about 255 basis points, and CareEdge Ratings at 250-300 basis points. That would take CET-1 to roughly 11-11.5% from 14% at the end of June.
S&P Global Ratings said on Friday it does not expect the ruling to affect Yes Bank's credit ratings, though it could weigh on earnings.
The bank's ownership has changed since 2020. In May 2025, Sumitomo Mitsui agreed to buy a 20% stake from SBI and seven other banks for about Rs 13,483 crore. It later raised its stake and is now the largest shareholder. SBI holds 10.8%, according to the bank's shareholding pattern as of September 30.
Sumitomo made the investment while the AT1 case was still pending. For FY26, Yes Bank reported deposits of Rs 3,18,969 crore, a net profit of Rs 3,476 crore, gross NPAs of 1.3% and net NPAs of 0.2%.
The bank will hold its analyst call at 8 am on Monday.
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Figures reflect the source report and its stated period. This article is for information and is not investment advice.
