Yes Bank Faces Earnings Pressure After AT-1 Ruling, but S&P Sees Ratings Holding

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The judgment upheld the cancellation of a write-off carried out during Yes Bank’s March 2020 reconstruction. Bondholders retained their legal victory, while the lender faces an accounting adjustment and continuing servicing costs. Yes Bank said it was reviewing the judgment and its implications. 

What Does The Ruling Mean For Yes Bank Customers?

For AT-1 bondholders, the decision preserves their successful challenge to the write-off. Annual coupon payments remain governed by the instruments’ Information Memoranda. The dispute involved household savings as well as institutional investments: SEBI’s 7 September 2022 adjudication order⁠ recorded complaints from customers who said the bonds had been presented as comparable to fixed deposits. 

For borrowers, our reading is narrower. The Yes Bank verdict addresses the lender’s obligations to bondholders; it should not be treated as an instruction to change loan repayments. A bond coupon⁠ is payable by the issuer to investors. A borrower’s EMI is payable under a separate loan agreement. Keeping those obligations apart prevents the earnings headline from being mistaken for a change in personal or home loan terms.

Why Does S&P Expect Yes Bank’s Ratings To Hold?

“We do not anticipate any meaningful impact on our total adjusted capital,” S&P said in its 15 October 2026 assessment. Reinstating the AT-1 instruments would restore a category of capital even as common equity falls. That offset underpins the agency’s view that Yes Bank can absorb the ruling.

The cost of servicing the bonds remains. Their coupons of 9% and 9.5% would put pressure on earnings, according to S&P. The agency’s assessment separates the bank’s capital position from its profitability: restored capital recognition does not cancel interest obligations. S&P said it would continue monitoring developments. 

Which Capital Figures Support S&P’s View?

S&P’s assessment, reported on 16 October 2026, sets out the following capital measures. The projected figures are the agency’s estimates, rather than results reported by Yes Bank after the judgment.

S&P expects Yes Bank to remain adequately capitalised after the adjustment. Its risk-adjusted capital ratio and the regulatory CET1 ratio are different measures and should not be presented as interchangeable. 

Why Was The AT-1 Write-Off Set Aside?

The final reconstruction scheme notified on 13 March 2020 omitted a write-down provision included in the draft. The administrator nevertheless ordered the bonds written down on 14 March 2020. His authority to take that action became central to the court challenge.

The Bombay High Court set aside the write-off on 20 January 2023. The Supreme Court’s 15 October 2026 judgment, 2026 INSC 1132⁠, dismissed the appeals and left that decision undisturbed. The ruling concerns the authority and procedure used for this particular write-off. 

What Has Yes Bank Said?

Yes Bank said it was examining the judgment and would make further disclosures as required.

Before the verdict, finance chief Niranjan Banodkar had defended the bank’s actions as consistent with contractual obligations and permitted procedures. During the 18 April 2026 earnings call, he said the lender would await the court’s decision and update stakeholders on its impact. That position appears in the bank’s published transcript⁠. 

Conclusion

S&P expects Yes Bank to absorb the capital consequences of the AT-1 ruling, while the restored bonds bring servicing costs back into focus. The agency’s position supports the bank’s credit profile without suggesting that the earnings impact disappears.

FAQs

1. What Happened To Yes Bank?

The Supreme Court upheld the cancellation of Yes Bank’s AT-1 write-off on 15 October 2026. S&P expects the ruling to weigh on earnings without affecting its ratings.

2. Why Were Yes Bank’s Unsecured Bonds Written Down?

Yes Bank wrote down the AT-1 bonds during its March 2020 reconstruction. The courts subsequently rejected the administrator’s authority to carry out that action under the final scheme.

3. Why Can Earnings Fall Without A Ratings Downgrade?

S&P expects restored AT-1 capital to largely offset the common-equity reduction. Coupon payments would still reduce earnings.

4. Does The Judgment Change Yes Bank Loan EMIs?

The judgment concerns AT-1 bond obligations. Borrowers’ repayments remain governed by their loan agreements.

5. What Did The Bombay High Court Previously Decide?

On 20 January 2023, the Bombay High Court set aside the write-off. Its decision remained stayed during the Supreme Court proceedings.