SBI Secures Rs 5,000 Cr via AT-1 Bonds At 8.34% Coupon Rate
State Bank of India (SBI) has successfully raised Rs 5,000 crore through the issuance of additional tier-I (AT-1) bonds at a coupon rate of 8.34 per cent. The base issue for these bonds was Rs 2,000 crore, featuring a 10-year maturity. SBI emphasised that the tenor of these bonds is perpetual, with a call option after 10 years and subsequently on every anniversary.
AT-1 bonds act as equity-like instruments, serving as a capital buffer and enhancing the bank's overall capital strength. The issue garnered substantial interest, with 108 bids totaling Rs 5,294 crore, oversubscribing by about 2.65 times the base issue. Dinesh Khara, SBI's chairman, highlighted the trust investors place in the bank, considering the tight pricing and diverse investor base. These bonds received a rating of AA+ with a stable outlook from Crisil and ICRA.
SBI's successful bond issuance is seen as a strategic move to diversify and raise long-term non-equity regulatory capital. The positive response suggests a resurgence in investor confidence in AT-1 bonds, even amid challenges. This development follows Canara Bank's recent fundraising of Rs 1,403 crore through AT-1 bonds at a coupon rate of 8.40 per cent.
The move is significant as banks aim to bolster capital reserves, addressing liquidity challenges and increased credit risk weights on unsecured lending by the RBI. As of September 30, SBI's capital adequacy ratio stood at 14.28 per cent. It's noteworthy that the appetite for AT-1 bonds faced a setback globally in 2023, particularly after Credit Suisse wrote down its AT-1 bonds worth USD 17 billion. In India, Yes Bank's AT-1 bonds worth Rs 8,000 crore were written off in 2020 as part of its restructuring scheme following an RBI-mediated resolution.
