Yes Bank Management Confirms No Urgency for Capital Raise Post Supreme Court Ruling
Yes Bank's leadership reassures stakeholders about capital strategies following a Supreme Court decision regarding AT-1 bonds.
Yes Bank is not in a hurry to raise capital after the Supreme Court ruling on AT-1 bonds.
The bank's CET-1 ratio is currently at 11.4%, below the ideal range of 13.5-14%.
Management plans to adjust balance sheets without requiring immediate repayment of principal.
Yes Bank's management has stated that there is no immediate pressure to raise capital following a recent Supreme Court ruling on October 15, which invalidated the write-down of Rs 8,415 crore in Additional Tier-1 (AT-1) bonds. The court ruled that the bank's administrator in 2020 did not have the authority to write off these bonds, emphasizing that such decisions fall under the jurisdiction of the Reserve Bank of India (RBI) once a lender reaches the Point of No Viability (PONV).
In a post-earnings call with analysts, Yes Bank's Managing Director and CEO, Vinay M Tonse, expressed confidence in the bank's ability to manage its capital needs without urgency. He noted the importance of thorough evaluation and assessment of the bank's financial situation. While acknowledging that the current Common Equity Tier-1 (CET-1) ratio of 11.4% is not optimal, he reassured stakeholders that the bank has mechanisms in place to preserve capital and safeguard interests.
Tonse highlighted that the bank's previous comfortable CET-1 ratio range was between 13.5% and 14%. He mentioned that the pro forma figures following the Supreme Court's decision would reflect a structural adjustment in the balance sheet rather than a profit or loss restatement. The bank has stored capital features, including a security portfolio valued at Rs 15 billion and additional assets with zero carrying value, which can be leveraged to support growth objectives.
The management clarified that the adjustment related to the Supreme Court ruling does not necessitate immediate repayment of the principal amount. They are currently assessing the timing and method for restating the bond and paying the coupon. The implications of this decision could significantly alter the bank's financial reporting, as it would have reported a net loss of Rs 5,213 crore for the September quarter instead of a net profit of Rs 1,084 crore had the ruling been in effect earlier.
Moving forward, Yes Bank's management is focused on navigating the implications of the Supreme Court ruling while ensuring that capital strategies align with long-term growth objectives. Stakeholders can expect further updates as the bank evaluates its financial position and prepares for potential adjustments in its capital structure.
