Yes Bank is unlikely to pay coupon payments due this year on its Additional Tier-1 (AT1) bonds despite a Supreme Court ruling overturning their write-off during the lender’s 2020 rescue, two persons familiar with the matter told Reuters.
The private sector lender is preparing to seek a review of the ruling, one of the sources told Reuters. Meanwhile, bondholders are demanding coupon payments that have remained unpaid since the bank wrote off the bonds six years ago.
The sources declined to be identified as they were not authorised to speak on the matter, Reuters reported.
Yes Bank AT1 bondholders seek clarity on coupon payments
Retail investors holding the bonds said on Thursday that they had not received coupon payments due on October 18, three days after the Supreme Court ruling.
In a letter to Axis Trustee Services Ltd, reviewed by Reuters, investors sought clarity on the status of the payments and urged the debenture trustee to intervene.
“We call upon the Trustee to obtain immediate written confirmation from Yes Bank as to whether this coupon has been paid, cancelled or remains outstanding,” bondholders said.
They referred to the Supreme Court’s direction that payment of annual coupons “shall remain unaffected by the outcome of these appeals and must be made in terms of the Information Memoranda.”
However, the sources said the bond documentation gives Yes Bank discretion over coupon payments. They added that the matter could be considered only after the AT1 bonds are reinstated on the bank’s balance sheet.
The bank’s accumulated losses from financial years 2020 and 2021 are expected to be fully offset only by FY2028, a third person familiar with the matter told Reuters. This could influence the lender’s decision on coupon payments, the source added.
According to Yes Bank’s latest annual report, the lender carries a debit balance of Rs 5,279 crore ($557 million) in its profit and loss account.
Yes Bank Q2 FY27 results: Net profit rises 63.2 per cent
Yes Bank reported a 63.2 per cent increase in consolidated net profit to Rs 1,084.08 crore for the second quarter of the financial year 2026-27, compared with Rs 664.31 crore in the corresponding quarter of the previous financial year.
On a standalone basis, the lender’s net profit rose to Rs 1,080 crore in Q2 FY27 from Rs 654.47 crore a year earlier. The bank had reported a standalone net profit of Rs 1,070.99 crore in the preceding quarter.
However, the bank’s reported financial results for the September quarter did not reflect the potential financial impact of the Supreme Court’s ruling on its write-down of AT1 bonds worth Rs 8,415 crore.
Yes Bank AT1 bond ruling: Potential impact on financials
Yes Bank said that after reinstating the principal amount of its AT1 bonds, it would have reported a net loss of Rs 5,217 crore for the September quarter, against the reported net profit of Rs 1,080 crore.
For the April-September period, the bank would have recorded a net loss of Rs 4,146 crore, compared with the reported net profit of Rs 2,151 crore.
The pro forma adjustment would have reduced the bank’s net worth to Rs 46,970 crore from the reported Rs 53,268 crore. Its borrowings would have increased to Rs 86,149 crore from Rs 77,734 crore.
However, the Basel III capital adequacy ratio would have remained unchanged at 14.5 per cent.
Return on assets would have turned negative at 4.3 per cent for the quarter and 1.7 per cent for the first half of FY27.
On October 15, the Supreme Court upheld the Bombay High Court judgment setting aside the March 2020 write-down of AT1 bonds and dismissed the appeals challenging the earlier ruling.
Following the judgment, Yes Bank said in an exchange filing that it was evaluating the ruling’s implications, implementation and available legal remedies.
Yes Bank Q2 FY27: Net interest income and margins
During the July-September quarter, Yes Bank’s net interest income increased 22.7 per cent year-on-year to Rs 2,822 crore from Rs 2,301 crore.
Non-interest income rose 14.4 per cent to Rs 1,882 crore from Rs 1,644 crore in the year-ago quarter.
The bank’s net interest margin improved to 2.6 per cent from 2.5 per cent a year earlier. However, it declined from 2.7 per cent in the preceding quarter.
Yes Bank deposits, advances and asset quality
Yes Bank’s advances increased 23.7 per cent year-on-year to Rs 3.10 lakh crore as of September 30, while deposits grew 19.5 per cent to Rs 3.54 lakh crore.
The lender also reported an improvement in asset quality during the quarter.
Its gross non-performing assets (GNPA) ratio declined to 1.2 per cent from 1.6 per cent, while the net NPA ratio improved to 0.2 per cent from 0.3 per cent.