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How Supreme Court ruling on AT1 bonds threatens Yes Bank’s growth prospects

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How Supreme Court ruling on AT1 bonds threatens Yes Bank’s growth prospects

How Supreme Court ruling on AT1 bonds threatens Yes Bank’s growth prospects

While the ruling does not entail a cash outflow or affect current business operations, the lower capital ratio could constrain the bank’s future growth and risk appetite and potentially accelerate a capital raise.

Supreme Court’s AT1 ruling could lower Yes Bank’s pro forma CET1 ratio to 11.4%, potentially constraining growth. ICICI Securities cut its target price to Rs17 from Rs24 and FY27 growth estimates to about 9%, retaining HOLD. NIM fell 10 basis points QoQ to 2.60%, with recovery expected in Q4FY27. Retail slippages remain elevated at Rs840-900 crore quarterly; potential UPI MDR income offers upside.

Yes Bank’s future growth could come under pressure after the Supreme Court upheld a Bombay High Court judgment relating to the write-down of Rs8,415 crore in additional tier 1 (AT1) bonds, with the bank’s pro forma common equity tier 1 (CET1) capital ratio estimated to fall by about 270 basis points to 11.4%. While the ruling does not entail a cash outflow or affect current business operations, the lower capital ratio could constrain the bank’s future growth and risk appetite and potentially accelerate a capital raise. The bank is yet to complete its assessment of the implications, according to a report by ICICI Securities, which cut its target price on the stock to Rs17 from Rs24 and retained its HOLD rating. Advt

The brokerage cut its FY27 growth estimates to about 9% amid uncertainty over the implications of the ruling. Yes Bank’s loans grew 24% year on year and 9% sequentially in the September quarter, while deposits rose 12% sequentially, driven by foreign currency non-resident (FCNR) deposits of Rs18,600 crore.


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