State Bank of India issues Rs 4.5K-crore in AT1, half of the amount planned

Bonds allocated at 8.2% coupon with call option in 2033

Bhaskar Dutta Mumbai

State Bank of India, the country’s largest lender, is likely to have finalised a sale of additional tier-1 (AT1) bonds worth Rs 4,544 crore out of a total planned issuance of Rs 10,000 crore, sources told Business Standard.
The bank had originally planned a base size of Rs 2,000 crore with a greenshoe option of Rs 8,000 crore, the sources said.

“The SBI AT1 bonds have been allocated for Rs 4,544 crore at a coupon of 8.20 per cent with the call option on February 21, 2033,” a source aware of the development said.
The coupon is the rate of interest periodically paid out to investors.

“It is possible that there could have been some difference of expectation when it came to the coupon rate; they (SBI) may have opted not to go for the entire sum at aggressive levels. In any case, SBI has successfully raised a large amount through AT1 bonds at very good rates so far in this financial year,” the source said.
On Wednesday, the 10-year benchmark government bond yield settled at 7.37 per cent.

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Corporate bond yields have risen sharply over the past couple of weeks due to concerns of the Reserve Bank of India extending its monetary tightening cycle in the face of elevated inflation.
Dealers said that AT1 bonds with a five-year call option issued by SBI in September were currently trading at around 8.10-8.15 per cent in the market, much higher than the coupon of 7.75 per cent at which they were issued. Bond prices and yields move inversely.

On December 14, 2022, SBI had said it was planning to raise up to Rs 10,000 crore through AT1 bonds in order to support business growth. On January 18, the bank had raised Rs 9,718 crore through the issuance of 15-year infrastructure debt, with the bonds bearing a coupon of 7.70 per cent.
Prior to the bond sale in January, SBI had issued 10-year infrastructure bonds worth Rs 10,000 crore at a coupon of 7.51 per cent on December 6, 2022.

Over the past few months, banks have embarked on a slew of debt issuances in order to raise capital as deposit growth has continued to lag credit growth significantly. This has exerted pressure on banks to mobilise funds in order to fund loan growth.
As on January 27, according to the latest RBI data, bank credit growth was at 16.3 per cent year-on-year. Deposit growth was at 10.5 per cent over the same period.

  • Banks have embarked on a slew of debt issuances 
  • Earlier bond size plan was Rs 10,000 crore (2,000 cr) base plus Rs 8,000 cr greenshoe)
  • On January 18, it aised Rs 9,718 cr in 15-year infrastructure debt at a coupon of 7.70%
  • On December 6, it issued 10-year infrastructure bonds worth Rs 10,000 cr at a coupon of 7.51%
  • In September, SBI had issued AT1 bonds with 5-year call option at 7.75%

First Published: Feb 20 2023 | 7:56 PM IST

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