YES Bank Q2 profit surges 65% on higher net interest income

YES Bank reported a 65 percent increase in net profit for the second quarter, buoyed by strong growth in net interest income, the bank's core earnings driver. The private sector lender's performance reflects improving operational metrics and loan growth across its portfolio.

However, the bank's results do not yet factor in the financial impact of a recent Supreme Court ruling on Additional Tier 1 (AT1) bonds, a category of hybrid securities held by several Indian banks. According to bank disclosures, if accounting treatment of the ruling is applied retrospectively on a pro forma basis, the bank would have recorded a net loss of ₹5,217 crore for the quarter and ₹4,146 crore for the half-year.

The AT1 securities in question are perpetual bonds used by banks to shore up capital ratios. The Supreme Court's decision has created uncertainty around their treatment, potentially requiring banks to take significant write-downs depending on how regulators and accounting standards bodies interpret the ruling.

YES Bank's management has flagged the issue but stated that the final financial impact would depend on regulatory guidance and the eventual accounting framework adopted by the banking sector. The Reserve Bank of India and banking regulators are expected to clarify the treatment of these instruments in coming weeks.