Yes Bank estimates core capital at 11.4% after reinstatement of bonds whose write-off was overturned
Key Facts
India's Yes Bank estimated that its common equity Tier 1 capital ratio would stand at about 11.4% after reinstating the principal of additional Tier 1 bonds whose write-off was overturned by the Supreme Court, according to comments by Chief Financial Officer Niranjan Banodkar reported by Business Standard. The pro forma estimate is based on the bank's financial position at the end of September and covers the capital impact of reinstating the bond principal. According to the transcript of its earnings call for the second quarter of fiscal 2027, the bank expected its total Tier 1 capital ratio to remain at about 13.7% on a pro forma basis after the bonds' reinstatement. Banodkar said reinstating the principal involved "neither repayment nor a cash outflow," explaining the financial nature of the step. Credit rating agency Crisil estimated that paying coupons for all prior periods could lower the common equity Tier 1 capital ratio to about 10.0%. The agency's estimate is based on the financial position as of 30 June 2026 and relates to a scenario in which all past coupons are paid, while the bank's estimate concerns reinstating the bond principal based on its financial position at the end of September.
India's Supreme Court upheld a Bombay High Court ruling overturning the bonds' write-off, following appeals by the bank, the Reserve Bank of India and the federal government, according to Reuters. Crisil said the write-off was overturned because of the timing of its execution after the bank was reconstituted under the reconstruction scheme. In its account of the ruling's legal background, the agency described the action as having taken place "outside the administrator's authority." On returns on the bonds, Crisil said the Supreme Court directed that "coupons be paid in accordance with the terms of the bonds' information memoranda." The instruments' terms describe the coupons as "discretionary and non-cumulative," according to the agency, the contractual description governing their payment. Implementation of the coupon-related part of the ruling is therefore subject to the terms of the bond memoranda cited by the court, alongside the reversal of the principal write-off.
The assessment of the ruling's implications coincided with the bank's announcement in October that second-quarter net profit rose 65% year on year to 10.80 billion Indian rupees, according to Reuters. The bank did not account for the ruling's impact in those reported quarterly results. According to the disclosure cited by the agency, accounting for that impact would have resulted in a quarterly loss of 52.17 billion rupees, instead of the reported profit. The pro forma estimate sets the ruling's impact on the same quarter's accounts against the profit growth the bank reported without including it. S&P said it did not expect the Supreme Court ruling to affect the bank's credit ratings, but expected it to weigh on future earnings, according to Reuters. In the stock market, the bank's shares fell as much as 14.5% following the ruling during the 15 October session, the agency reported.
Banodkar said in comments reported by Business Standard that "the timing of the bonds' reinstatement and any coupon payments remains under assessment." The bank's assessment thus covers when to reinstate the principal, as well as any coupon payments under the instruments' terms. On the legal front, the bank is considering all available remedies, including further proceedings before the Supreme Court, according to Reuters' report accompanying the quarterly results. On funding, the chief financial officer said during the earnings call that the bank would assess measures to strengthen its capital, including raising fresh funds. He added that the assessment of those measures would take shareholders' interests and the cost of capital into account as part of the decisions the bank is considering in addressing the implications of reinstating the bonds.