India’s largest lender, State Bank of India (SBI), raised ₹5,000 crore on Wednesday via Additional Tier-I (AT-I) bonds, offering a 7.98% coupon rate. This marks SBI’s first AT-I issuance in FY25, aimed at strengthening its capital base.

The bonds, which carry a call option exercisable after 10 years, are designed to comply with Basel-III norms and include provisions for interest payment alterations if certain capital thresholds are breached.

AT-I bonds are high-risk debt instruments issued by banks to shore up their capital base. They can be converted into equity in the event of extreme financial distress, offering a lower coupon rate compared to the bank’s previous AT-I issuance in January, which was priced at 8.34%.

Market participants viewed the latest bonds as fairly priced, given the ₹5,000 crore size of the issuance and recent declines in government bond yields, which have fallen by over 30 basis points since April.

The issuance had a base size of ₹2,000 crore with a greenshoe option for an additional ₹3,000 crore. The bonds are rated ‘AA+’ by Crisil Ratings. SBI Capital Markets Ltd. arranged the issue, with the allotment set for Thursday.

As of June 30, 2024, SBI reported a capital adequacy ratio of 13.86%, down by 70 basis points from the previous year, while its common equity tier-1 (CET1) ratio stood at 10.25%. SBI has already raised ₹15,000 crore through Basel-III compliant Tier-II bonds in FY25 to support its deposit base, which has lagged behind credit growth.

Separately, Indian Bank is preparing to raise ₹5,000 crore through 10-year infrastructure bonds rated 'AAA' by Care and Crisil, with the issuance set for Thursday. In September, Indian Bank raised ₹5,000 crore via 10-year bonds at a 7.24% interest rate.

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Published on:October 23, 2024, 8:42:19 PM IST