Yes Bank's Q2 profit climbs 65%, but Supreme Court AT1 ruling left out of results

what happened

Yes Bank said on Saturday that its second-quarter profit jumped 65% to 10.80 billion Indian rupees, or $114 million, according to a report by TradingView. The lender noted that the result leaves out the effect of a recent Supreme Court decision that voided its 2020 write-off of 84 billion rupees ($884 million) in additional tier-1 bonds. Had that effect been included, the bank would have reported a quarterly loss of 52.17 billion rupees.

On Thursday the Supreme Court backed a 2023 ruling from the Bombay High Court that had annulled the write-down, rejecting appeals filed by the lender itself, the Reserve Bank of India and the central government. Japan's Sumitomo Mitsui Banking Corporation owns 24.99% of the Mumbai-based bank, which is now studying what the decision means and how and when it must be applied, and is keeping further court proceedings on the table. The figures are provisional and may change.

Recalculated for the ruling, net worth would drop to 469.70 billion rupees from 532.68 billion, while borrowings would climb to 861.49 billion from 777.34 billion. The total capital adequacy ratio would remain at 14.5%, the bank said. On Friday it had warned that its common equity tier-1 ratio could fall by roughly 250 basis points. Analysts polled by LSEG had expected profit of 9.55 billion rupees.

why it matters

AT1 bonds are high-risk instruments that can be written down or converted into shares when a bank runs into trouble, so a court reversal of a write-off sets a benchmark for similar paper across India's banking sector. Operating trends look steadier: net interest income rose 22.7% to 28.22 billion rupees, advances grew 23.7% and deposits 19.5%, while the gross NPA ratio eased to 1.2% from 1.3%.

market impact

Indian banks and AT1 debt: higher risk of write-downs on similar bonds pressures Yes Bank shares

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