YES Bank book value may fall up to 26% after SC ruling on AT-1 bonds
The recent Supreme Court ruling on AT-1 bonds poses a serious risk to Yes Bank’s financial stability. A potential payout near ₹8,415 crore could lead to a significant decline in its book value per share. Moreover, this may weaken the bank's CET1 r...
The bank's shares have fallen by 17% in two trading sessions following the Supreme Court's verdict.
ET Intelligence Group: The extent of the financial impact of the AT-1 ruling on Yes Bank will depend on the amount it is required to pay and whether the payout is made upfront or staggered over time. The Supreme Court ruling is expected to reduce the bank's book value per share by up to 26% if it is required to reinstate the principal and also pay accumulated coupon arrears. Excluding the arrears, the book value may reduce by around 16%. Though in either case the bank's CET1 ratio is likely to remain above the RBI's requirement of 8%, the ruling will reduce the bank's ability to absorb any losses in the near term and support future growth.
The bank's shares have fallen by 17% in two trading sessions following the Supreme Court's verdict that upheld the January 2023 Bombay HC ruling, declaring Yes Bank's ₹8,415 crore write-off of Additional Tier-1 bonds in March 2020 illegal.
If the bank restores the ₹8,415 crore principal and it is not required to pay coupon arrears, book value per share may decline to ₹13.9 from ₹16.6, Yuvraj Choudhary, research analyst at Anand Rathi Institutional Equities told ET. The bank's net worth could fall to ₹43,923 crore from ₹52,338 crore, while its common equity tier-1 (CET1) ratio could decline by 250 basis points to 11.5% from around 14%.
