Yes Bank stock pares gains, slips further after 17.5% crash; Q2 profit jumps 65% but AT-1 bond ruling weighs

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Yes Bank shares gave up early morning gains to slip into red on Monday, extending losses after plunging 17.5 percent over the previous two sessions following the Supreme Court's ruling on the lender's Rs 8,415-crore Additional Tier-1 (AT-1) bonds. The decline came despite the private sector lender reporting a 65 percent year-on-year rise in net profit for the September quarter, as concerns persisted over the potential financial impact of the court's judgment.

Yes Bank stock declined 0.29 percent to Rs 17.45 in morning trade, taking its year-to-date loss to 18.8 percent, compared with a fall of 11.5 percent in the Nifty 50 during the same period. The company's market capitalisation stood at approximately Rs 54,805 crore.

The stock traded lower amid weakness in the broader market. At 9:47 am, the Sensex was down 26.32 points, or 0.04 percent, at 74,702.95, while the Nifty 50 slipped 11.75 points, or 0.05 percent, to 23,134.40. Bank Nifty declined 0.43 percent.

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Yes Bank Q2 results: Net profit rises 65%, NII grows 23%

Yes Bank reported a 65 percent year-on-year increase in standalone net profit to Rs 1,080 crore for the second quarter of FY27, supported by higher net interest income and lower provisions. Net interest income (NII) rose 22.7 percent to Rs 2,822 crore from Rs 2,301 crore a year earlier. Operating profit before provisions and contingencies increased 29.4 percent to Rs 1,678 crore, while provisions fell 24.2 percent to Rs 317 crore from Rs 419 crore.

The lender also reported an improvement in asset quality. Its gross non-performing asset (NPA) ratio declined to 1.2 percent from 1.6 percent a year earlier, while the net NPA ratio improved to 0.2 percent from 0.3 percent. The bank's reported Common Equity Tier-1 (CET-1) capital ratio stood at 13.7 percent, while its capital adequacy ratio was 14.5 percent, compared with 15 percent a year earlier.

AT-1 bond ruling remains a key concern

Despite the improvement in operating performance, the Supreme Court's October 15 ruling remains a significant concern for Yes Bank. The court upheld the Bombay High Court's decision quashing the lender's Rs 8,415-crore AT-1 bond write-off during its 2020 restructuring.

Although the ruling's impact was not recognised in reported Q2 earnings, Yes Bank disclosed that its estimated pro forma net result would be a loss of Rs 5,217 crore, against the reported profit of Rs 1,080 crore. Its CET-1 ratio would decline to 11.4 percent from 13.7 percent, while return on assets would fall to negative 4.3 percent from 0.9 percent. The estimates remain subject to final legal, accounting and regulatory treatment.

What investors will watch

The focus now shifts to whether Yes Bank can sustain its earnings momentum while addressing the potential capital impact of the AT-1 bond ruling. Although the lender's Q2 performance showed stronger interest income, lower provisions and improving asset quality, uncertainty over the final financial liability could continue to weigh on investor sentiment.

Global brokerage Citi had earlier maintained its Sell rating on Yes Bank and reduced its target price to Rs 17.50 per share from Rs 22 following the Supreme Court's decision. The revised target is marginally below Monday's early trading price of Rs 17.66.