YES Bank Q2 Profit Rises 65% but Bond Ruling Threatens Big Loss
YES Bank Limited (NSE:YESBANK) reported a 65% increase in second-quarter net profit to 1,080 crore, driven by higher income and improved asset quality. However, the reported figures do not include the potential financial impact of an October 15 Supreme Court decision that upheld a ruling setting aside the bank's 2020 write-down of 8,415 crore in Additional Tier-1 (AT1) bonds.
If the bank absorbs the full impact of the bond ruling, pro-forma calculations show it would record a quarterly post-tax loss of 5,217 crore. Auditors highlighted that recognizing the judgment would make reported financial results materially different. Under the pro-forma adjustments, net worth would decrease from 53,268 crore to 46,970 crore, while total borrowings would rise to 86,149 crore from 77,734 crore. Return on assets would also swing from 0.9% to negative 4.3%. Shares traded down 3.42% at 17.5 INR.
Managing Director and CEO Vinay Tonse stated that the bank is reviewing the judgment in detail and exploring appropriate legal and financial steps. Investors will monitor whether the lender pursues legal remedies and how regulatory requirements shape the final accounting treatment of the AT1 obligations.
Key points
- YES Bank Limited reported Q2 net profit of 1,080 crore, up 65% year-over-year on higher income and improved asset quality.
- A pro-forma calculation factoring in a Supreme Court ruling on 8,415 crore of AT1 bonds shows a potential post-tax loss of 5,217 crore.
- The AT1 bond adjustment would reduce net worth to 46,970 crore and increase borrowings to 86,149 crore.
- Return on assets would drop to negative 4.3% on a pro-forma basis compared to the reported 0.9%.
- Bank management is evaluating legal options and accounting implications following the court decision.
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How we writeDisclaimerQuestions and answers
What was YES Bank's reported profit for Q2?
YES Bank reported a second-quarter net profit of 1,080 crore, up 65% from the previous period due to higher income and improved asset quality.
How does the AT1 bond ruling affect YES Bank's financials?
If the judgment on 8,415 crore of AT1 bonds is recognized, YES Bank estimates a pro-forma quarterly loss of 5,217 crore, lowering its net worth to 46,970 crore and raising borrowings to 86,149 crore.
What is YES Bank doing in response to the court judgment?
Bank leadership is examining the judgment in detail to evaluate its accounting implications and determine appropriate legal and regulatory options.