Yes Bank Reports Q2 Profit Amid Significant AT1 Bond Litigation Risk

Yes Bank reported a consolidated net profit of Rs 1,084.08 crore for the quarter ended September 30, 2026, compared to Rs 664.31 crore in the same period last year. Total income for the quarter rose to Rs 10,601.99 crore, up from Rs 9,113.13 crore in the year-ago period.

Reader Takeaway: Strong quarterly growth is overshadowed by a qualified audit opinion regarding an Rs 8,415 crore bond liability.

What just happened

Joint statutory auditors have issued a modified, qualified opinion on the bank’s financial results. This qualification stems from a Supreme Court judgment dated October 15, 2026, which upheld the reversal of the bank’s March 2020 decision to write down AT1 bonds worth Rs 8,415 crore. The auditors noted that the current financial statements do not reflect the impact of this ruling, which would have fundamentally altered the bank's reported performance.

Why this matters

The bank provided proforma data to demonstrate the potential impact of the judgment. If the impact had been recognized as of September 30, 2026, the bank’s reported profit of Rs 1,084 crore would turn into a proforma loss of Rs 5,213 crore. Additionally, the annualized return on assets would shift from a positive 0.9% to a negative 4.3% on a proforma basis.

The backstory

The dispute involves the bank’s 2020 decision to write down AT1 bonds during its reconstruction period. The Supreme Court's recent dismissal of the bank's appeal reinforces the High Court ruling against the write-down. The bank is now in discussions with legal advisors to determine the next steps and the resulting accounting and regulatory implications.

Asset Quality and Capital

The bank maintained a Basel III Capital Adequacy Ratio of 14.6% as of September 30, 2026. Asset quality remained stable, with Gross NPA at 1.2% (Rs 3,875.23 crore) and Net NPA at 0.2% (Rs 757.05 crore).

What to track next

Investors should monitor official disclosures regarding the specific accounting adjustments the bank will undertake to comply with the Supreme Court order. The legal strategy to mitigate the impact on the bank's capital position will be a key driver for stock performance in coming quarters.