YES Bank shares experienced a 3% decline in Friday's trading, following a significant 14.53% drop on Thursday. The fall comes as the private lender announced it is scrutinizing a recent Supreme Court judgment that upheld a Bombay High Court ruling, invalidating the write-down of Additional Tier-1 (AT1) bonds worth Rs 8,415 crore.
The Supreme Court dismissed appeals filed by YES Bank, the Reserve Bank of India, and the Union government against the Bombay High Court's January 20, 2023, decision. This judgment pertains to the write-down of AT1 bonds that occurred in March 2020, as part of the bank's reconstruction plan.
Impact on Capital Adequacy
YES Bank indicated that the judgment is likely to impact its Common Equity Tier 1 (CET1) ratio. The bank projects a proforma impact of a 250 basis point reduction in its CET1 ratio (including profits) as of June 30, 2026, due to the reinstatement of the AT1 Bonds' principal amount. However, the bank stated that its Tier1 ratio on a proforma basis is expected to remain unimpacted at 14.0 percent.
Bank's Response and Future Steps
In response to the ruling, YES Bank confirmed it is meticulously reviewing the order and its full implications. The bank plans to make suitable disclosures in due course. It further assured stakeholders that it possesses access to appropriate capital-management levers and maintains the flexibility to undertake additional capital actions as deemed necessary to pursue its growth objectives. The institution reiterated its commitment to strengthening its franchise and ensuring consistent customer service.
Analyst Outlook
Following the news, leading financial analysts revised their outlooks on YES Bank. Morgan Stanley maintained an 'Underweight' rating on the stock, setting a target price of Rs 17. Citi also advised a 'Sell' rating, with a target price of Rs 17.50 per share, reflecting concerns over the potential capital impact.