YES Bank reported quarterly net profit of approximately ₹10.8 billion ($114 million), representing 65% year-over-year growth.
However, the bank disclosed that its financial statements do not yet incorporate the consequences of an Indian Supreme Court ruling invalidating the 2020 write-off of approximately ₹84 billion ($884 million) in Additional Tier 1 bonds.
According to the bank's provisional calculations, recognizing the ruling would produce a quarterly loss of approximately ₹52.17 billion, reduce net worth from ₹532.68 billion to ₹469.70 billion, and lower its Common Equity Tier 1 capital ratio by approximately 250 basis points.
The bank stated that its overall capital adequacy ratio would remain approximately 14.5% and that it is evaluating available legal remedies. Reuters
Source: Reuters — YES Bank financial results, October 17
Why it matters strategically
AT1 bonds are designed to absorb losses when financial institutions experience severe stress.
However, the legal authority to impose those losses matters.
The Supreme Court's ruling concerns the legality of the write-off mechanism used during YES Bank's 2020 restructuring.
This introduces a distinction between three concepts:
Economic necessity: A bank may need creditors to absorb losses to remain viable.
Regulatory authorization: Authorities may establish a framework permitting restructuring.
Legal enforceability: Specific restructuring actions must remain within the powers granted by law.
A restructuring can satisfy the first two conditions but fail the third.
