Yes Bank Capital Buffer Faces Pressure After Court Ruling
Analysts estimate the ruling could lower Yes Bank’s CET1 ratio, while the bank reviews the judgment’s financial implications.
Key takeaways
- The Supreme Court dismissed appeals against the reversal of Yes Bank’s AT1 bond write-down.
- Analysts estimate the ruling could reduce the bank’s CET1 ratio to about 11-11.5%.
- The judgment does not order immediate cash repayment of ₹8,415 crore in bonds.
- Yes Bank says it is examining the final order and its implications.
Yes Bank’s core capital could fall after the Supreme Court upheld a ruling reversing the write-down of ₹8,415 crore in additional Tier-1 bonds. Analysts and rating agencies estimate the impact could reduce the bank’s Common Equity Tier-1 ratio by 230-300 basis points.
The bank’s CET1 ratio was 14% at the end of June. Analysts estimate it could fall to about 11-11.5% after the ruling. Yes Bank said it is examining the final order and its implications.
The Supreme Court dismissed appeals by Yes Bank, the Reserve Bank of India and the government against a Bombay High Court judgment that had set aside the March 2020 write-down. The affected bonds were issued in 2016 and 2017.
The judgment does not require an immediate cash repayment of the principal, and it does not set a liability for past coupons. Annual coupon payments remain unaffected by the appeals, the court said, and must follow the bonds’ information kit.
The eventual financial impact will depend on how the judgment is implemented and how the bonds are accounted for. Analysts estimated a potential liability of around ₹13,770 crore in a more severe scenario that includes principal and accrued coupons.
This article was produced with the help of AI technology. Based on reporting by the outlets listed above.
