Yes Bank warns core capital will fall after court revives ₹8,415 crore bond liability

Yes Bank expects its common equity Tier 1 ratio to drop to 11.4% by September after India’s Supreme Court overturned the write-off of ₹8,415 crore in additional Tier-1 bonds.

Yes Bank said its core capital ratio is likely to fall after India’s Supreme Court overturned the write-off of its additional Tier-1 bonds, sharpening pressure on a lender that is still rebuilding confidence more than five years after its crisis-era rescue.

Niranjan Banodkar, the bank’s chief financial officer, told analysts after earnings that the common equity Tier 1 ratio, a key measure of a lender’s ability to absorb losses, is expected to slip to 11.4% by September, down by more than two percentage points. He said the timing and method of reinstating the bonds, as well as the payment of coupons, were still under review.

The remarks follow last week’s court ruling, which upheld a Bombay High Court decision quashing Yes Bank’s 2020 write-down of ₹8,415 crore of additional Tier-1, or AT1, bonds. According to court reporting in The Economic Times and Bar and Bench, the judges found the administrator did not have the authority to extinguish the securities after the reconstruction scheme took effect, leaving the lender on the hook for repayment and accrued interest. Yes Bank has said it is examining the judgment and its options.

The bank said its overall Tier 1 capital ratio should remain at about 13.7%, still above the minimum required under Indian rules. Banodkar said any repayment to bondholders would depend on the bond documentation and the court’s ruling. The issue matters not only for the bank’s balance sheet but also for investors, after Yes Bank shares have fallen about 17% since Thursday. Japan’s Sumitomo Mitsui Banking Corp is the largest shareholder, with a 24.9% stake, and the lender is weighing capital actions to support its growth plans.