Yes Bank braces for hit to core capital ratio after SC ruling on AT1 bonds

Yes Bank on Friday said its key capital ratio could fall by about 2.5 percentage points after the Supreme Court upheld a ruling against the bank’s decision to write-off riskier bonds in 2020.

The lender has access to “appropriate capital-management levers, and it preserves the flexibility to undertake additional capital actions, as considered appropriate to pursue its growth objectives,” it said in an exchange filing on Friday.

The bank said it is also reviewing the court’s judgment and evaluating its legal options and potential next steps.

The reinstatement of the Additional Tier 1 bonds’ principal is expected to reduce Yes Bank’s Common Equity Tier 1 ratio, including profits, by about 250 basis points on a pro forma basis as of June 30, 2026, Yes Bank said in the filing. Its overall Tier 1 capital ratio is expected to remain unchanged at 14 per cent, it said.

The bonds, known as Additional Tier 1 securities, were written off in March 2020 as part of a restructuring of the lender during a government-led rescue following a financial crisis at the bank.

The Yes Bank rescue has parallels with Credit Suisse because AT1 bonds were wiped out in both cases while shareholders retained some value, effectively placing bondholders behind equity investors in absorbing losses.

The Supreme Court’s decision overturning the permanent write-off at Yes Bank has raised the prospect of new liabilities for the private-sector lender, in which Japan’s Sumitomo Mitsui Banking Corp. owns nearly 25 per cent.