YES Bank files SC review petition on AT1 bonds

YES Bank filed a review petition regarding the Supreme Court's October 15, 2026 judgment on the ₹8,415 crore Additional Tier-1 (AT1) bond writedown. This legal move follows a strong Q2 FY27 where net profit surged 65% YoY to ₹1,080 crore on a 23% rise in net interest income to ₹2,822 crore. The review petition seeks reconsideration of the judgment that directly impacts the bank's legacy capital structure and reserve accounting. I am watching the Q3 FY27 earnings call in January 2027 for management's commentary on the legal timeline and the sequential impact on the Common Equity Tier 1 (CET1) ratio, which stood at a comfortable 13.87% in early 2026 but faces a potential 250 bps swing depending on the final regulatory treatment of these instruments. The market currently prices YES Bank purely on its legacy asset quality baggage, viewing the AT1 bond litigation as a permanent suppression on its price-to-book multiple. What the consensus misses is the structural de-risking this specific legal maneuver enables. Step one: the 65% YoY profit growth proves the core lending franchise is generating robust internal capital, reducing reliance on external equity dilution. Step two: filing an Article 137 review petition is a calculated strategy to force finality or a negotiated settlement, eliminating the binary regulatory overhang that has kept institutional investors on the sidelines. Step three: with a strong CET1 buffer, the bank can absorb the accounting treatment of this ₹8,415 crore event without breaching regulatory minimums, turning a legacy liability into a resolved balance sheet footnote. The market misprices this as endless litigation risk, ignoring it is a deliberate catalyst to unlock the bank's normalized valuation multiple. Accumulate on legal overhang resolution for long-term price-to-book re-rating. D Disclosure: I do not hold positions in this stock. This is for educational purposes only and does not constitute investment advice. YESBANK