Sumitomo-backed Yes Bank faces up to ₹5,200 crore earnings hit as SC upholds squashing of its AT-1 bonds write-off

Yes Bank would have reported a net loss of ₹5,217 crore in the September quarter had it recognised the impact of the Supreme Court verdict overturning the write-off of its additional tier-1 (AT-1) bonds worth ₹8,415 crore, the bank said in its Q2 investor presentation filed with the stock exchanges.

The private-sector lender, 24.9% owned by Japan’s Sumitomo Mitsui Banking Corporation, reported a net profit of ₹1,080 crore for the July-September, according to earnings announced on Saturday.

Had the judgement's impact been known, its CET-1 capital ratio would have dropped to 11.4% from the reported 13.7%, while its return on assets would have turned negative at 4.3%, compared with the reported positive 0.9%.

Quick answers to key questions

•5 QUESTIONS

1

How could the Supreme Court’s Yes Bank AT-1 bond verdict affect the bank’s earnings?⌵

Yes Bank estimated it would have reported a ₹5,217 crore net loss in Q2 if it had recognised the verdict’s impact, including the reversal of the ₹8,415 crore AT-1 bond write-off. The estimate is subject to further legal, accounting and regulatory assessment.

2

Why did the Supreme Court overturn Yes Bank’s AT-1 bond write-off?⌵

The court said the issue was how the write-off was carried out. It held that Yes Bank’s administrator could not exercise a power reserved for the RBI and that the write-down conflicted with the applicable RBI circular and bond terms.

3

Has Yes Bank recognised the AT-1 verdict’s impact in its Q2 results?⌵

No. Yes Bank said it had not recognised any impact in its reported Q2FY27 results while it assesses the judgment’s consequences and determines the appropriate accounting treatment.

4

Will Yes Bank have to resume coupon payments on its AT-1 bonds?⌵

Unless the verdict is overturned, Yes Bank will have to restart annual coupon payments, subject to the bonds’ terms and applicable regulations. The status of coupon payments due from 2020 onward was not immediately clear.

5

What are AT-1 bonds, and why can they be risky for investors?⌵

AT-1 bonds are perpetual bank capital instruments with no fixed maturity date and contractual loss-absorption provisions. Their coupons are discretionary, and investors can face significant losses if the bonds are written down under the applicable terms and rules.

The lender noted that these pro forma estimates, including the estimated loss, are subject to revision based on the consequential actions, further legal assessment and final accounting and regulatory treatment.

“Pending completion of this assessment and determination of the appropriate accounting treatment, no impact arising from the judgment has been recognised in the reported Q2FY27 financial results,” the bank said.

Yes Bank's net profit rose 65% year-on-year to ₹1,080 crore in the September quarter, while remaining largely flat sequentially.

Operating profit rose 29.4% to ₹1,678 crore, and net interest income rose 22.7% to ₹2,822 crore. Asset quality also improved, with gross non-performing assets (NPAs) declining to 1.2% from 1.6% a year earlier.

The bank said it is evaluating options to strengthen its capital buffers to support future growth. It added that it respects the Supreme Court's judgment and is assessing the consequential actions, implementation requirements, financial and regulatory implications, and available legal remedies.

Yes Bank sank into a liquidity crisis in March 2020 as bad loans swelled, prompting the Reserve Bank of India (RBI) to take control of the lender and freeze withdrawals. A consortium of lenders led by the State Bank of India (SBI) was assembled to bail out the bank by injecting fresh equity capital.

As part of the rescue exercise, the bank's administrator wrote off around ₹8,415 crore worth of AT-1 bonds, prompting Axis Trustee Services and other bondholders to move court.

Also Read | Yes Bank flags 250 bps CET1 hit after SC ruling

On Thursday, the Supreme Court dismissed appeals challenging the Bombay High Court's order that quashed the write-off earlier.

“The question is not whether the AT-1 bonds could have been or ought to have been written down off. The question is the manner in which it was done,” the judgment penned by justices Dipankar Datta and Augustine George Masih said.

The administrator could not exercise a power reserved for the RBI, the court said, noting the write-down was contrary to the RBI’s own master circular on Basel-III capital regulations and the terms governing the bonds.

Yes Bank shares plunged 14.5% to ₹18.12 on the National Stock Exchange (NSE) after the judgement was passed, turning the worst-performer in the Nifty Bank index as investors fretted about the ruling's financial impact.

AT-1 bonds do not have a fixed maturity date, meaning banks are not required to repay the principal on a predetermined date but must make coupon payments subject to the bonds’ terms and applicable regulations.

Most such bonds also carry a call option, typically exercisable after five or 10 years, allowing the bank to redeem them early.

Therefore, unless the verdict is overturned, Yes Bank will have to restart making yearly coupon payments to bondholders, Mint reported earlier. However, the fate of the past dues, from 2020 to now, could not be immediately ascertained.

Eshita Gain is a digital journalist at Mint, where she joined in May 2025. She writes on corporate developments, personal finance, markets, and business trends, with a focus on delivering timely and relevant stories to a broad audience. <br><br> While her core beat lies in business and finance, she is not confined to a single niche and frequently explores stories across domains, including international relations and policy developments. <br><br> She holds a postgraduate diploma in business and financial journalism by Bloomberg from the Asian College of Journalism (ACJ), Chennai. During her time there, she received rigorous training in tracking financial data, interpreting corporate filings, and reporting on business developments. She has pursued her graduation from St. Joseph’s University, Bengaluru in a multi-disciplinary course. Her majors included Journalism, International Relations, peace and conflict studies. <br><br> Eshita has previously worked in digital marketing, which enables her to write SEO friendly copies that are clear and engaging. <br><br> Her primary interest lies in breaking down complex subjects and writing clear, accessible copies that inform readers. She aims to bridge the gap between technical financial language and everyday understanding. Outside the newsroom, Eshita enjoys reading non-fiction, and exploring new places, constantly seeking fresh perspectives and stories beyond headlines.

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