India's Yes Bank expects AT1 reinstatement to cut core capital ratio by 250 bps

India's Yes Bank anticipates the reinstatement of its previously written-off additional tier-1 (AT1) bonds will lower its core capital ratio by around 250 basis points. The country's top court overturned the bank's 2020 write-off of 84 billion rupees ($883.7 million) in additional tier-1 bonds on Thursday, putting pressure on the lender and regulators defending the move.

Yes Bank stated its tier-1 capital ratio would stay at 14% on a pro forma basis. The bank is assessing the ruling's ramifications and will provide more details "in due course." Credit agency S&P Global Ratings does not foresee the Supreme Court's decision influencing India's top bank's ratings, though it will impact future earnings.

Yes Bank's regulatory capital is sufficient, with a common equity tier-1 ratio of 13.87% as of March 2026, capable of absorbing the anticipated 250 bps hit while surpassing the 5.5% minimum requirement, according to S&P. S&P believes the 84 billion rupee loss to common equity will be largely offset by the AT1 bond reinstatement.

The ratings agency anticipates the lender's credit profile to withstand the ruling, addressing procedural errors during the 2020 rescue. S&P predicts Yes Bank's risk-adjusted capital ratio will stay between 8% and 8.5% through March 2028, compared to 9% in March 2026. It remains unclear if Yes Bank will contest the ruling.