Yes Bank shares rise as Q2 profit beats estimates, but AT1 bond verdict hit pegged at Rs 5,217 crore. What

This came after the Supreme Court on Thursday upheld a 2023 Bombay High Court judgment that set aside the write-off, dismissing appeals filed by Yes Bank, the Reserve Bank of India (RBI) and the central government, triggering a sharp selloff in the stock. The bank said the reported figures were indicative and subject to revision as it assessed the implications of the ruling.7% year on year to Rs 2,822 crore.

Advances grew 23.7% from a year earlier, while deposits increased 19.5%. Provisions for bad loans and other contingencies fell 24.2% to Rs 317 crore.Other income rose 14.4% to Rs 1,882 crore. The private lender’s asset quality also improved during the quarter. The gross non-performing asset (NPA) ratio stood at 1.2% at the end of September, compared with 1.3% at the end of June.Live EventsYes Bank’s earnings announcement on Saturday came after the AT1 ruling.

The dispute dates back to March 2020, when Yes Bank was placed under a moratorium by the RBI following a sharp deterioration in its financial position, mounting bad loans and concerns over governance. The central bank subsequently introduced a reconstruction scheme, under which State Bank of India and several other lenders invested capital to rescue the struggling bank.As part of the restructuring, Yes Bank permanently wrote down AT-1 bonds worth Rs 8,415 crore to zero.

The amount comprised Rs 3,000 crore raised in December 2016 and another Rs 5,415 crore raised in October 2017.AT-1 bonds are perpetual debt instruments issued by banks to strengthen their capital base. They typically offer higher interest rates than conventional bonds but carry greater risks, including the possibility of investors losing their entire investment if specified regulatory triggers are activated.In January 2023, the Bombay High Court set aside the write-off, finding that the bank's administrator lacked the necessary authority to extinguish the bonds under the circumstances of the reconstruction.

The final reconstruction scheme had also omitted an explicit provision for writing down AT-1 bonds.Morgan Stanley maintained its ‘Underweight’ rating on Yes Bank shares with a target price of Rs 17 apiece, implying around 3% downside from the stock’s previous closing price of Rs 17.5 apiece on NSE.Yes Bank shares increased more than 1% to Rs 17.73 apiece on NSE on Monday morning. This came after a sharp 17% plunge over the past two sessions.Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser.

Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution.

They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.(You can now subscribe to our ETMarkets WhatsApp channel)