Yes Bank reported a net profit of ₹1,080 crore for Q2 FY27, marking a 65% year-on-year growth and significantly higher than the estimated ₹1,008 crore, according to latest results announced on Saturday, October 17. The earnings came despite the bank not taking into account any potential losses arising from the Supreme Court's decision to set aside the write-off of its Additional Tier-1 (AT-1) bonds worth over ₹8,400 crore. Net Interest Income (NII) grew 22.7% year-on-year to ₹2,822.5 crore, compared to ₹2,301 crore in the same quarter last year, with net interest margin (NIM) improving to 2.75% from 2.7% in the previous quarter. The strong performance was aided by provisions declining to ₹317.4 crore from ₹395 crore in June, while other income increased to ₹1,881.5 crore from ₹1,644.3 crore last year, both contributing significantly to the bank's profitability growth.
The Supreme Court has confirmed the Bombay High Court's 2023 judgment quashing Yes Bank's decision to write off Additional Tier-1 (AT-1) bonds worth ₹8,400 crore, dealing a significant blow to the bank in which Japan's Sumitomo Mitsui Banking Corp (SMBC) is now the largest shareholder. A Bench of Justices Dipankar Datta and Augustine George Masih held that the administrator lacked the authority to write down these bonds that were not part of the restructuring scheme, questioning whether the RBI was not aware of the consequences. Yes Bank disclosed in its latest filing that had the Supreme Court ruling's impact been recognized, the bank would have posted a quarterly loss of ₹5,217 crore, representing a potential earnings hit of over four times the reported profit. Sources have told CNBC-TV18 exclusively that the lender could recognize the potential ₹5,300 crore to ₹5,400 crore earnings hit during the ongoing quarter itself, or push it to the December quarter, but not later than that.
Shares of Yes Bank ended at ₹17.5 on Friday, declining 3.4% following the Supreme Court's verdict on the lender's AT-1 bond write-off, which had already dropped 14.5% on Thursday. The stock has lost nearly a fifth of its value over the past two trading sessions as the apex court's decision has raised fresh concerns over the bank's capital position and future profitability. The ruling has raised concerns about the potential impact on the bank's capital position and future profitability, overshadowing expectations of an improvement in its core banking performance. In an exchange filing, YES Bank disclosed that it is currently examining the Supreme Court order in detail and evaluating all available legal options as it plans to make suitable disclosures in due course of time.
Asset quality remained stable with Gross NPA at 1.2% from 1.3% in June, while Net NPA remained unchanged at 0.2% from 0.2% in the previous quarter. In absolute terms, Yes Bank's Gross NPA stood at ₹3,875 crore and Net NPA at ₹757 crore, compared to ₹3,704 crore and ₹677 crore respectively during the previous quarter. Based on its business update reported earlier this month, loans and advances had grown by 23.8% year-on-year to ₹3.09 lakh crore, while deposits saw growth of 19.5% to ₹3.54 lakh crore from ₹2.96 lakh crore earlier. CASA Ratio stood at 33.7% from 30% in the year-ago period, with normalized loan growth at 17.7% and deposit growth at 13.2% from last year.
Yes Bank's pre-provision operating profit (PPOP) is estimated at ₹1,753 crore, up 35.26% year on year from ₹1,296 crore and 2.88% sequentially, with fee income expected to improve supported by growth in foreign exchange income, card fees and processing fees. The bank's loan growth of 23.8% and deposit growth of 19.5% demonstrate strong business momentum, while the CASA ratio improvement to 33.7% indicates better funding efficiency. Analysts expect healthy loan growth and an expanding deposit base to support Yes Bank's interest income during the quarter, with the reinstatement of AT-1 bonds and its implications for the balance sheet being a key focus for investors. The bank's ability to maintain stable asset quality while achieving strong growth metrics despite the legal challenges represents a positive development for its operational performance.
