Yes Bank could face a one-time earnings impact of ₹5,300 crore to ₹5,400 crore following the Supreme Court's decision to invalidate the write-off of Additional Tier-1 (AT1) bonds worth ₹8,415 crore.
According to a report by CNBC-TV18, which cited officials familiar with the matter, the Mumbai-based private sector lender is examining the financial and accounting implications of the judgment.
The bank is assessing how to reinstate the bonds in its financial statements and whether outstanding coupon payments must be recognised.
As per the report, the adjustment could appear in the September quarter results, scheduled for Oct 17, or in the December quarter of FY27.
SC Upholds Ruling Against AT1 Bond Write-Off
The Supreme Court on Thursday upheld the Bombay High Court's January 2023 decision setting aside the bank's March 2020 bond write-off.
The court held that Yes Bank's Administrator lacked the authority to extinguish the bonds under the final reconstruction scheme.
The disputed write-off occurred during the Reserve Bank of India-led restructuring of Yes Bank following a severe financial crisis.
State Bank of India and other financial institutions provided capital support under the rescue arrangement.
However, the bank wrote down its AT1 bonds to zero, prompting legal challenges from bondholders.
Investors argued that the final reconstruction scheme did not permit the Administrator to cancel their investments.
The Supreme Court's ruling has revived questions concerning the bank's treatment of the outstanding bond liability.
Bank Assessing Impact
As per the report, reinstating the AT1 instruments could require reversing the earlier write-off and restoring the amount to the bank's capital accounts.
The corresponding adjustment may affect its profit and loss statement, depending on the accounting treatment adopted.
The estimated ₹5,300 crore to ₹5,400 crore impact factors in Yes Bank's normal quarterly earnings of approximately ₹1,000 crore.
The lender reported a net profit of ₹1,071 crore in the June quarter.
Consequently, the potential adjustment is substantially larger than its recent quarterly profitability.
However, the figures remain preliminary estimates rather than a formally disclosed loss.
The final financial impact will depend on Yes Bank's interpretation of the judgment, applicable accounting requirements and any associated coupon obligations.
