YES Bank Q2 Profit Rises 65% to ₹1,080 Crore; AT1 Ruling Clouds Outlook

YES Bank reported a 65% year-on-year rise in net profit to ₹1,080 crore for the September quarter of FY27, up from ₹654.47 crore a year earlier. The private sector lender announced its results on Saturday, 17 October, but said the numbers do not reflect the financial impact of a Supreme Court verdict on its additional tier-1 (AT1) bonds.

Net interest income rose 22.7% to ₹2,822 crore, while other income grew 14.4% to ₹1,882 crore. Provisions for bad loans and contingencies fell 24.2% to ₹317 crore. Advances grew 23.7% and deposits 19.5% from a year ago.

Asset quality improved marginally. The gross non-performing asset (NPA) ratio stood at 1.2% at the end of September, compared with 1.3% at the end of June.

₹5,217 crore pro-forma loss

On 15 October, the Supreme Court upheld a Bombay High Court judgment that had set aside the bank’s 2020 write-down of AT1 bonds worth ₹8,415 crore. The court dismissed appeals filed by YES Bank, the Reserve Bank of India and the Union government against the High Court’s order of 20 January 2023.

In its filing, the bank disclosed what its accounts would show if the restatement of the AT1 principal were recognised. On that basis, it would post a net loss of ₹5,217 crore for the quarter and ₹4,146 crore for the first half of FY27.

Net worth would fall to ₹46,970 crore from the reported ₹53,268 crore, and net borrowings would rise to ₹86,149 crore from ₹77,734 crore. Annualised return on assets would turn negative at 4.3%, against the reported 0.9%, though the capital adequacy ratio under Basel III would remain at 14.5%.

The bank had earlier estimated that the ruling would reduce its CET1 ratio by about 250 basis points. Its auditors cautioned that reported performance could have been materially different had the impact been recognised.

Bank weighs legal options

The AT1 bonds were written off in March 2020 under the reconstruction scheme that rescued the lender, led by the RBI with State Bank of India as the anchor investor. Bondholders challenged the write-off, and the Bombay High Court quashed it in January 2023, leading to the appeals now dismissed by the apex court.

Managing Director and CEO Vinay Tonse said the bank was examining the matter in detail and would act in line with applicable legal and regulatory requirements. The lender said it is assessing the steps needed to implement the judgment, their timing and the accounting effects, and is weighing further legal remedies, including possible proceedings before the Supreme Court.

Shares of YES Bank closed 3.42% lower at ₹17.50 on the NSE on 16 October, the day after the verdict. Kotak Institutional Equities retained its ‘Sell’ rating, saying management may need to speed up capital-raising, and said it would revisit its fair value after management commentary.

Monday’s session is the stock’s first since the results. Investors will track how and when the bank books the liability, whether it seeks a review of the verdict, and the size and timing of any fresh capital raise.