Earnings India

YES Bank reported a 65% surge in Q2 net profit to 1,080 crore, but a Supreme Court ruling could trigger a 5,217 crore post-tax loss, threatening its capital adequacy. The decision to overturn a 2020 write-down of AT1 bonds has raised concerns about financial stability and regulatory compliance.

YES Bank Q2 Profit Rises 65% Amid 5,217 Cr Loss Risk from AT1 Bond Ruling

The Supreme Court upheld a Bombay High Court judgment on October 15, 2026, reversing YES Bank’s 2020 write-down of AT1 bonds. This ruling could result in a post-tax loss of 5,217 crore, reducing the bank’s net worth to 46,970 crore from 53,268 crore, according to auditors. The pro-forma adjustment would also increase borrowings to 86,149 crore and slash the return on assets to negative 4.3% from 0.9%. The AT1 bonds involved total 8,415 crore.

The potential loss risks YES Bank’s capital adequacy ratios, raising borrowing costs and limiting operational funding. Auditors warned the outcomes might have been materially different without recognizing the AT1 bond write-down. Legal battles with the RBI and government could further complicate the bank’s regulatory standing, as the court’s decision highlights the risks of complex financial instruments like AT1 bonds.

Shareholders and investors face devalued holdings, while regulators and auditors must reassess financial disclosures. The bank’s legal and accounting teams are evaluating remedies, with the RBI and YES Bank considering a review petition on the ruling. The pro-forma return on assets turning negative signals operational distress, intensifying scrutiny over the bank’s financial health.

The unresolved issue is how the court’s decision will shape YES Bank’s regulatory and operational future. The bank’s ability to navigate legal and accounting challenges will determine its path forward, with significant implications for capital and stability.

YES Bank is evaluating the financial and accounting implications of the judgment and exploring legal remedies. The bank and RBI are considering a review petition on the ruling.

YES Bank’s potential 5,217 crore post-tax loss from the AT1 bond ruling threatens its capital and financial stability. The key uncertainty is how the court’s decision will shape the bank’s regulatory and operational future.

Topics: Banking, Financial Regulations, Legal Rulings, Capital Adequacy, AT1 Bonds, Corporate Finance, Regulatory Compliance, Financial Reporting

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Source: ET Markets