SBI gets Rs 2k-cr capital via additional Tier-1 bonds

State Bank of India (SBI), India’s largest lender, has raised Rs 2,100 crore through additional Tier-1 (AT1) bonds to boost its capital base as well as business growth. It placed the entire AI-1 bond issue with YES Bank.

The Basel-III-compliant debt instrument would have a coupon (interest rate) of nine per cent payable annually, SBI informed the BSE. The bond instrument carries a call option after five years.  Last week, IDBI Bank had raised Rs 1,500 crore through AT-1 bonds at a steep rate of 11.09 per cent.  

On August 24, SBI had informed stock exchanges that its panel of directors had approved a proposal to raise capital of up to Rs 11,100 crore through AT-1 bonds from domestic and international investors. The bank would issue Tier-I bonds in one or more tranches to domestic and international markets. It might opt for public offering or use the private placement route for raising capital.

It has appointed Citi, Standard Chartered Bank, JP Morgan, HSBC, and National Bank of Abu Dhabi as managers for the proposed AT-1 bond being offered abroad.

This would be the first such offering by an Indian bank in overseas AT-1 space. SBI would like to test the waters – interest and pricing band - before firming up the size, merchant banking sources said.

SBI will also receive Rs 7,575 crore from the government in the form of equity this year. SBI’s capital adequacy ratio (CAR) was 14.01 per cent in June 2016, while it was 12 per cent a year ago. Out of 14.01 per cent, common equity tier-1 (CET-1) was 10.71 per cent in June 2016, while CAR was 12 per cent with CET-1 of 9.59 per cent a year ago.

SBI’s capital adequacy ratio improved substantially in the first quarter of FY17 due to gains from revaluation of real estate assets. It boosted CET-1 by Rs 14,383 crore (72 basis points).