Yes Bank shares tumble over 20% in two weeks amid AT-1 bond shock: Is more downside ahead? Here's what experts say
Yes Bank shares have come under intense selling pressure, falling 21.23% in two weeks as uncertainty surrounding the bank's additional tier-1 (AT-1) bond liabilities weighs on investor sentiment. The stock has declined 30.60% over the past month and 11.29% over the past week, as investors assess the potential impact of a Supreme Court ruling on the bank's capital position and future profitability.
The sell-off follows the Supreme Court's 15 October 2026, verdict upholding the Bombay High Court's decision to set aside the 2020 write-down of Yes Bank's AT-1 bonds worth ₹8,415 crore. The ruling has raised questions about the bank's potential liabilities, capital adequacy and the pace of its recovery.
Meanwhile, Nippon Life India Asset Management said on 22 October that it had received in-principle approval from the Securities and Exchange Board of India (SEBI) to settle a dispute relating to its past investments in Yes Bank's AT-1 bonds, according to a Reuters report.
In 2020, as part of Yes Bank's reconstruction, AT-1 bonds worth ₹8,415 crore were written down to zero, while equity shareholders retained their holdings. The bondholders challenged the decision, and the Bombay High Court ruled in their favour in 2023.
The Supreme Court has now upheld that decision, setting aside the bond write-down and restoring the legal claim relating to the bonds. The verdict has created uncertainty over the financial implications for Yes Bank, including the potential impact on its capital ratios and interest liabilities.
The key concern for investors is whether the additional liability could constrain the bank's ability to accelerate growth, strengthen profitability and maintain adequate capital buffers.
Brokerages have turned cautious on Yes Bank following the verdict, flagging potential pressure on earnings, book value and capital adequacy.
Nuvama Institutional Equities believes the potential AT-1 bond-related impact could constrain the bank's growth acceleration, while weak core profitability remains a concern. The brokerage has cut its target price to ₹16 from ₹22 and reiterated its 'Reduce' rating, valuing the bank at 0.9 times its estimated adjusted book value for September 2028.
Nuvama added that a potential capital infusion by Sumitomo Mitsui Financial Group (SMFG) remains an important factor to monitor.
JM Financial said the Supreme Court verdict has altered Yes Bank's earnings outlook despite improvements in its underlying business. The brokerage has cut its FY27 and FY28 earnings-per-share estimates by 148% and 7%, respectively, largely due to the potential AT-1 bond impact.
JM Financial estimates that the development could reduce the bank's common equity tier-1 (CET1) capital ratio to around 11.4% from 13.7%, potentially bringing forward the need for a capital raise. It has maintained its 'Reduce' rating and lowered its target price to ₹17 from ₹22, valuing the bank at one times its estimated FY28 price-to-book value.
The brokerage also highlighted the need to monitor future security receipt recoveries and the sustainability of fee income from third-party product distribution, both of which could influence the bank's ability to deliver a return on assets of 1%.
The technical outlook has weakened sharply following the recent correction, with analysts identifying key support and resistance levels for the stock.
Hitesh Tailor, Technical Research Analyst at Choice Broking, said Yes Bank is witnessing a strong bearish trend on the weekly chart after facing selling pressure near ₹25.80, where the 200-week exponential moving average (EMA) coincided with the upper boundary of a rising channel.
The stock has also broken below its multi-year rising trendline support near ₹18.50, which now acts as an immediate resistance level during any recovery attempt.
Tailor noted that the weekly relative strength index (RSI) has dropped to 25.77, placing it in deeply oversold territory and reflecting persistent selling pressure. He identified ₹15 as the next key support level and said the technical outlook would remain weak unless the stock reclaims ₹18.50 on a weekly closing basis.
Despite the market's concerns over the AT-1 bond verdict, Yes Bank's operating performance has shown signs of improvement.
Abhinav Tiwari, Senior Research Analyst at Bonanza, said the stock's sharp correction reflects concerns that restoring the AT-1 bond liabilities could weaken the bank's capital cushion. However, he pointed to improving business performance as a potential source of support.
Yes Bank's net profit rose 65% year-on-year to ₹1,084 crore in Q2 FY27, while net interest income increased 23%. Gross non-performing assets improved to 1.2%, indicating better asset quality.
Tiwari added that the bank's credit profile remains stable, although additional interest liabilities could create pressure. He advised investors to remain cautious in the near term as uncertainty over capital requirements persists.
According to Tiwari, improving profitability, better asset quality and potential support from SMBC provide some comfort. However, a sustained recovery will depend on greater clarity regarding the AT-1 bond liability and the bank's future capital position.
Yes Bank faces a crucial period as investors weigh improving operating performance against the financial and regulatory uncertainty arising from the AT-1 bond verdict.
Nuvama and JM Financial remain cautious, citing the potential impact on capital adequacy, earnings and profitability. From a technical perspective, ₹15 is an important support level, while ₹18.50 is the key resistance to watch.
A clearer assessment of the bond-related liability, any potential capital infusion and the bank's ability to sustain its earnings recovery will likely determine the stock's next direction.
Dhanya Nagasundaram works as a Content Producer at LiveMint, specializing in news related to financial markets, stocks, and business. With over eight years of experience in journalism and content creation, she has honed her skills in data-driven reporting and market analysis. Her focus is on monitoring stock trends, initial public offerings (IPOs), corporate news, policy shifts, and larger economic trends that affect investors and market players. <br><br> At LiveMint, Dhanya consistently writes and produces articles that make complex financial topics accessible to readers. She keeps a close eye on equity markets, commodities, and macroeconomic indicators, assisting audiences in comprehending how global and domestic events influence investment perspectives. Her stories frequently underscore emerging trends within sectors, the IPO market, company earnings results, and market strategies pertinent to both retail and institutional investors. <br><br> Before her tenure at LiveMint, Dhanya accumulated a wealth of professional experience at various companies, including MintGenie, Informist, Cogenics, Chary Publications, KPMG, and the Royal Bank of Scotland. These positions allowed her to establish a solid foundation in financial research, reporting, and content creation. <br><br> Throughout her career, she has explored numerous subjects such as trading strategies, commodities, IPOs, wealth generation, corporate profits, and macroeconomic indicators. Her background in both financial journalism and corporate settings has given her the ability to tackle stories with analytical rigor while ensuring clarity for her audience. Through her contributions, Dhanya strives to deliver insightful, trustworthy, and investor-centric financial content.
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HomeMarketsStock MarketsYes Bank shares tumble over 20% in two weeks amid AT-1 bond shock: Is more downside ahead? Here's what experts say
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