Yes Bank says AT-1 bonds reinstatement to impact CET-1 ratio by 250 bps; Citi says 'Sell'

1 hour ago

Shares of Mumbai-based private lender Yes Bank Ltd. will be in focus again on Friday, October 16, after the steep sell-off seen in the stock the previous session, which was the biggest seen in a single day in the last six years.

Yes Bank shares fell 15% on Thursday after the Supreme Court ruled against the write-off carried out of the lender's Additional Tier-1 (AT-1) bonds in 2020. The bonds, worth ₹8,400 crore, were written off during the bank's rescue and restructuring exercise, resulting in bond holders losing their principal capital invested.

According to the Apex Court's ruling, Yes Bank will have to honor the AT-1 bond as per the prescribed coupon rate of 9.5% and 9%. The bank had raised ₹8,415 crore through these bonds in 2016 and 2017.

The ₹8,400 crore figure is more than double of Yes Bank's net profit in financial year 2026, which stood at ₹3,476 crore.

In an exchange filing on Thursday after market hours, Yes Bank acknowledged the issue at hand, stating that they have always made adequate disclosures in this regard and they are in the process of obtaining the court order and evaluate the steps forward. The bank said that it will make disclosures as and when warranted in this regard.

In a separate exchange filing on Friday, October 16, Yes Bank said that it respects the judgment of the Supreme Court and is exploring all available legal options and steps going forward.

The bank also said that it has access to appropriate capital-management levers and preserve the flexibility to undertake additional capital actions to pursue its growth objectives.

Yes Bank noted that the pro-forma impact of the reinstatement of the AT-1 bonds, principal amount on the CET-1 ratio (including profits) as on June 30, 2026, is expected to be around 250 basis points, while the Tier-1 ratio on a proforma basis will remain unchanged at 14%.

Yes Bank's fall on on Thursday wiped out over ₹10,000 crore of its market capitalisation.

Citi Says 'Sell' Yes Bank

Global investment banking firm Citi maintained its "sell" recommendation on Yes Bank and also cut its price target to ₹17.5 from ₹22 earlier.

Calling the Supreme Court development an adverse, CET-1 dilutive event, Citi said that the write-down of the AT-1 bond was explicitly used to shore up capital at the bank.

Citi is estimating a 250 basis point hit to Yes Bank's CET-1 ratio, falling to 11.5%, principal only, assuming coupon payment is discretionary and non-cumulative, thereby eroding the bank's book value by 13% to 14% and necessitating a capital raise to restore buffers.

Mutual Funds, Retail Trim Yes Bank Stake In September Quarter

Yes Bank is one of the biggest holdings among small retail investors, or those who have an authorised share capital of up to ₹2 lakh.

According to the September quarter shareholding pattern, both retail investors, and Mutual Funds trimmed their stake in the lender during the July-September period.

Yes Bank now has 56.68 lakh retail shareholders as per the September shareholding, who own a 18.23% stake in the lender, compared to the 57.55 lakh retail shareholders, who owned a 18.64% stake at the end of the June quarter.

India's mutual funds, which owned a 6.43% stake in the bank, now own a 5.48% stake, and Kotak Arbitrage Fund, whose name appeared in the June shareholding with a 1.03% stake, no longer appears in the September shareholding list.

Life Insurance Corporation of India continues to hold a 3.98% stake, as do the various lenders, who had rescued the bank in 2020 and partly sold off their holdings during the deal with Mitsubishi earlier this year.

Shares of Yes Bank ended 14.5% lower on Thursday at ₹18.12. The next major trigger for the stock will be the bank's September quarter results, which will be reported on Saturday, October 17.

(Updates From the Supreme Court by Ashmit Kumar)

Home/Market News/