Yes Bank Shares Fall Sharply as Supreme Court Ruling Revives AT-1 Bond Claims

Yes Bank shares have fallen 21.23% in two weeks due to uncertainty over additional tier-1 bond liabilities. The stock dropped 30.60% over the past month and 11.29% over the past week. This selling pressure follows a Supreme Court verdict on 15 October 2026, upholding the Bombay High Court decision to set aside the 2020 write-down of AT-1 bonds worth ₹8,415 crore. In 2020, these bonds were written down to zero during the bank's reconstruction while equity holders kept their shares. Bondholders challenged this, and the Bombay High Court ruled for them in 2023.

Brokerage Reactions

Brokerages have turned cautious due to potential pressure on capital, earnings, and growth. Nuvama Institutional Equities cut its target price to ₹16 from ₹22 and kept a 'Reduce' rating, stating the impact could limit growth and core profitability. Nuvama also noted that a potential capital infusion by Sumitomo Mitsui Financial Group is an important factor to watch. JM Financial cut its FY27 and FY28 earnings-per-share estimates by 148% and 7% respectively, and lowered its target price to ₹17 from ₹22 while keeping a 'Reduce' rating. JM Financial estimates the verdict could reduce the common equity tier-1 capital ratio to around 11.4% from 13.7%.

Technical Outlook and Business Performance

Choice Broking technical analyst Hitesh Tailor stated the stock is in a strong bearish trend after facing selling pressure near ₹25.80 and breaking below its rising trendline support near ₹18.50. The weekly relative strength index has dropped to 25.77 into oversold territory, with ₹15 identified as the next key support level. Despite market worries, Yes Bank reported a 65% year-on-year increase in net profit to ₹1,084 crore for Q2 FY27. Net interest income grew 23%, and gross non-performing assets improved to 1.2%. Bonanza senior research analyst Abhinav Tiwari noted that while improving business performance offers support, the potential AT-1 liabilities create capital cushion concerns.

Context

Additional tier-1 bonds are a type of unsecured, perpetual debt instrument issued by banks to meet capital adequacy requirements under global norms. When a bank faces severe financial distress or triggers specific regulatory loss-absorption clauses, these bonds can be written down or converted into equity to protect depositors. The recent legal challenges highlight the complex balancing act courts face when resolving major institutional reconstructions and protecting the rights of different classes of investors.