SBI raises Rs4k cr via AT1 bonds
While the Bank has AAA credit rating from local credit agencies, the AT1 offering is rated AA+, which is the highest rating in the country for these instruments in view of the hybrid and high-risk nature of these instruments
Mumbai: Country's largest lender, State Bank of India (SBI), has raised Rs 4,000 crore of the Basel compliant Additional Tier 1 (AT1) bonds, on Wednesday at coupon rate of 7.72 per cent. Bizz Buzz was the first to break this story in its edition dated August 27, This is the first AT1 Bond issuance in the domestic market post the new SEBI regulations. The issue garnered overwhelming response from investors with bids in excess of Rs 10,000 crore received against a base issue size of Rs 1,000 crore which is an indicator of the trust the investors place on the country's largest Bank. This also very clearly demonstrates the maturity of the Indian Investors in their selection of Issuers for such instruments, the bank said in a statement.
Based on the response, the Bank has decided to accept Rs 4,000 crore at a coupon of 7.72 per cent. This is the lowest pricing ever offered on such debt, issued by any Indian bank since the implementation of Basel III capital rules in 2013. The AT 1 instrument is perpetual in nature, however, it can be called back by the issuer after five years or any anniversary date thereafter, it added. While the Bank has AAA credit rating from local credit agencies, the AT1 offering is rated AA+, which is the highest rating in the country for these instruments in view of the hybrid and high-risk nature of these instruments. SBI being the leader, other banks, the State-owned ones in particular, are likely to follow it suit. Ajay Manglunia, MD, Debt Capital Market, JM Financials, told Bizz Buzz that depending upon their capital raising appetite other PSU banks may follow it suit as the coupon rate of 7.72 per cent on which SBI has raised money in the domestic rate is an attractive rate and the banks do need capital.
According to him, some of the other banks which may join the bandwagon include Bank of Baroda, Punjab National Bank and Canara Bank. However, none of those banks has made any official announcement in this connection so far. Meanwhile, the private sector lender Axis Bank today raised $600million through AT1 in the overseas market at a yield of 4.10 per cent.