Yes Bank may take a blow in core capital ratio

Yes Bank anticipates a 250 basis point reduction in its core capital ratio following a Supreme Court ruling that overturned the cancellation of Rs 8,400 crore worth of additional tier-1 (AT1) bonds issued during its 2020 rescue. The bank is currently assessing the implications of the ruling, with further disclosures expected in due course.

The Supreme Court's decision reverses the write-off of the bonds, a move previously defended by regulators. While the Financial Conduct Authority's credit rating agency, S&P Global Ratings, does not expect the ruling to impact Yes Bank's ratings, analysts project a lower risk-adjusted capital ratio for the bank over the next few years.

S&P Global Ratings expects Yes Bank's Tier-1 capital ratio to stand at 14% on a pro forma basis, with a further assessment of the ruling's implications to follow. The agency believes the bank will absorb the capital impact and maintain an adequate capital position, with its common equity Tier-1 (CET1) ratio at 13.87% as of March 2026. This ratio is above the minimum requirement of 5.5%.

The estimated Rs 8,400 crore impact on common equity is expected to be largely offset by the reinstatement of the AT1 bonds. While the bank's credit profile is projected to withstand the ruling, the development may weigh on future earnings.