Yes Bank (YESBANK) Q2 FY27 Profit Surges 62.5% YoY, But Supreme Court Ruling Casts a Shadow

Yes Bank’s latest quarterly results tell two stories. The headline shows a bank in recovery, posting robust profit growth on the back of a healthier loan book. Yet a Supreme Court judgment, delivered just before earnings, threatens to impose a liability larger than a year’s worth of profit, casting the operational wins in a different light.

Revenue rose 16.9% year-on-year to ₹8,639.8 crore, while net profit surged 62.5% to ₹1,080 crore. Sequentially, profit was nearly flat, edging up just 0.8% as operating expenses grew faster than income. The net profit margin improved sharply from a year ago but dipped from the previous quarter.

The engine behind the growth

The profit jump was powered by core banking strength. According to reports from Taxguru and Moneycontrol, net interest income grew 22.7% year-on-year, driven by a 23.7% surge in advances. Retail asset disbursements alone grew 35%. Non-interest income also rose a healthy 14.4%. Lower provisions, which fell 24.2% from a year ago, provided a further lift to the bottom line.

Asset quality continued to improve. The gross NPA ratio fell to 1.2% from 1.6% a year ago, as reported by ET Now, while the net NPA ratio held steady at 0.2%. This cleaner balance sheet allowed the bank to set aside less money for bad loans.

The margin squeeze and the legal cloud

Despite higher revenue, the net profit margin contracted sequentially from 13.3% to 12.5%. Business Standard reported that operating profit fell 1.5% quarter-on-quarter as rising expenses outpaced income gains. This hints at the cost pressures of rapid growth.

The far larger concern is off the books. The Supreme Court recently upheld a ruling that set aside Yes Bank’s 2020 write-down of ₹8,415 crore in Additional Tier-1 (AT1) bonds. The bank has not recognized this in its results, stating it is evaluating the implications. A pro forma disclosure, cited by Business Standard, shows that including it would turn the reported ₹1,080 crore profit into a net loss of ₹5,217 crore for the quarter.

The path ahead

Management, as noted by TipRanks, highlighted steady franchise growth but flagged this legal uncertainty. The bank’s capital adequacy ratio stood at a comfortable 14.5%, according to Moneycontrol, but the potential reinstatement of the AT1 liability could reduce its core equity tier-1 ratio by about 250 basis points.

The core business momentum is clear, with the bank targeting loan growth of 15-17% and a net interest margin above 3% over two years, per StockFin analysis. Yet the AT1 overhang means the bank’s reported profitability and capital strength exist alongside a significant contingent liability that investors must weigh.