Yes Bank Reports 65% Profit Growth as Supreme Court AT1 Bond Ruling Raises Financial Uncertainty

Yes Bank reported a substantial increase in its earnings for the second quarter, although the results did not account for the potential financial consequences of a recent Supreme Court decision concerning its previously written-off additional tier-1 (AT1) bonds. The Mumbai-based lender announced on October 17, 2026, that its quarterly profit had climbed 65% to 10.80 billion Indian rupees, equivalent to approximately $114 million. However, the bank cautioned that the reported figures did not incorporate the impact of the court’s ruling, which could significantly alter its financial position.

The Supreme Court’s decision overturned the bank’s 2020 write-off of AT1 bonds valued at 84 billion rupees, or around $884 million. According to Yes Bank’s regulatory filing, recognising the consequences of the judgment would have transformed its reported quarterly profit into a loss of 52.17 billion rupees.

The judgment represents a significant development for Yes Bank, which underwent a major restructuring in 2020 after experiencing financial difficulties. The latest legal decision has reopened questions surrounding the treatment of the bonds issued before the restructuring and the potential consequences for the lender’s balance sheet.

Following the judgment, Yes Bank said it was examining the implications of the decision, including how and when it might be implemented. . Until the bank determines its next steps, the ultimate effect of the ruling on its financial statements remains uncertain.

The potential adjustment would have a considerable effect on several key balance-sheet figures. Yes Bank said its net worth could decline to 469.70 billion rupees from the previously reported 532.68 billion rupees if the court decision were reflected in its accounts. At the same time, its borrowings would increase to 861.49 billion rupees from 777.34 billion rupees.

Despite these possible changes, the bank stated that its overall capital adequacy ratio would remain unchanged at 14.5%. CET1 capital is an important measure of a bank’s ability to absorb financial losses through its highest-quality capital resources.

AT1 bonds are financial instruments that carry substantial risks for investors. They are designed to absorb losses when a bank experiences severe financial stress, either through conversion into equity or through a complete write-off, depending on the applicable terms and circumstances. Their treatment has become particularly significant in cases involving bank rescues and restructuring, where regulators and investors may disagree over how losses should be allocated.

Yes Bank was rescued in 2020 through a restructuring programme that brought in new investors to support the struggling institution.  The Supreme Court’s latest decision has challenged that action, creating uncertainty over how the previous transaction will ultimately be addressed.

Japan’s Sumitomo Mitsui Banking Corporation holds a 24.99% stake in Yes Bank, giving the international banking group a substantial interest in the Indian lender. The implications of the court ruling are therefore relevant to the bank’s capital position and its broader financial outlook, although Yes Bank has not yet finalised how it will respond.

Excluding the potential impact of the AT1 bond decision, the lender’s operating performance showed improvement across several areas

The bank also recorded growth in its lending and deposit businesses. Advances expanded 23.7% compared with the corresponding period a year earlier, while deposits increased 19.5%. These figures indicate that the bank continued to expand its core banking operations during the quarter.

Income from sources other than interest also strengthened. Other income rose 14.4% to 18.82 billion rupees, contributing to the reported increase in profitability. Meanwhile, provisions for potential bad loans and other contingencies declined 24.2% to 3.17 billion rupees. Lower provisioning requirements can support earnings by reducing the amount set aside to cover possible future losses.

Asset quality improved modestly during the period. The measure represents the proportion of gross advances classified as non-performing assets and is closely monitored to assess the health of a lender’s loan portfolio.

The bank’s reported profit of 10.80 billion rupees also exceeded market expectations.

Nevertheless, the Supreme Court’s decision introduces an important qualification to the otherwise stronger operating results. Until Yes Bank completes its assessment and determines whether to pursue further legal action, the reported earnings provide only a partial picture of its financial position. The eventual treatment of the disputed AT1 bonds could materially affect its net worth, borrowings and common equity capital, making the outcome of the bank’s next steps an important consideration for investors.

Currency conversion: $1 = 94.9600 Indian rupees.