Yes Bank Q2 profit beats estimates; AT1 ruling impact unbooked

Yes Bank reported second-quarter profit of Rs 1,080 crore on October 17, up 65% from a year earlier and above market expectations, but did not recognise the impact of a Supreme Court decision setting aside its 2020 AT1 bond write-off. According to The Economic Times, the Mumbai-based lender said in a regulatory filing that recognising the ruling's impact would instead produce a quarterly loss of Rs 5,217 crore.

The reported profit exceeded the Rs 955 crore forecast by analysts in LSEG data. The bank nevertheless cautioned that its figures were indicative and could be revised as it assessed the court decision's implications.

Court ruling leaves accounting impact unresolved

On October 15, the Supreme Court upheld a 2023 Bombay High Court judgment setting aside the write-off of Rs 8,400 crore in additional tier-1 bonds. It dismissed appeals by Yes Bank, the Reserve Bank of India and the central government.

The bonds had been written off by the administrator overseeing Yes Bank's restructuring in 2020. That rescue brought new investors into the private-sector lender. Japan's Sumitomo Mitsui Banking Corporation now holds a 24.99% stake.

Yes Bank said it was examining how and when to implement the decision and considering available legal remedies, including further proceedings before the Supreme Court. Its assessment does not yet establish a final accounting treatment.

Net worth and capital disclosures

The lender's indicative calculations show net worth falling from Rs 53,268 crore to Rs 46,970 crore if its financial figures were adjusted for the ruling. Borrowings would rise from Rs 77,734 crore to Rs 86,149 crore.

Yes Bank said its total capital adequacy ratio would remain at 14.5%. Separately, in an October 16 filing, it said its common equity tier-1 ratio would fall by around 250 basis points. These are distinct capital measures; the unchanged total ratio should not be read as an absence of impact on common equity capital.

The lender said the estimates could change as it determined how to account for the judgment.

Lending growth and lower provisions support earnings

Net interest income rose 22.7% year on year to Rs 2,822 crore. Advances increased 23.7%, while deposits grew 19.5%.

Provisions for bad loans and other contingencies declined 24.2% to Rs 317 crore, while other income increased 14.4% to Rs 1,882 crore.

The gross non-performing asset ratio improved to 1.2% at the end of September from 1.3% at the end of June, indicating a smaller share of gross advances classified as non-performing.