SBI gains after raising Rs 4,000 cr via AT-1 bonds

State Bank of India (SBI) rose 2.72% to Rs 200.20 after the state-run lender said it sold Rs 4,000 crore of the Basel-compliant Additional Tier 1 (AT1) bonds at a coupon of 7.74%.

This is the lowest pricing ever offered on such debt, issued by any bank since the country started implementing the stringent Basel lll capital rules in 2013. As the aggregate bids were in excess of Rs 6,000 crore, the bank exercised the full green shoe option of Rs 3,000 crore over and above the base issue size of Rs 1,000 crore, SBI said in a statement after trading hours on Wednesday (9 September).

While State Bank of India has AAA credit rating from local credit agencies, its 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.

While the AT1 instrument is perpetual in nature, it can be called back by the lender after five years or any anniversary date thereafter.

This issue comes after a successful issue of Tier 2 bonds last month by SBI, aggregating to Rs 8931 crore, at 6.80%, which is again the best ever pricing for Tier 2 debt instruments.

SBI is public sector banking and financial services statutory body. As of 30 June 2020, the Government of India held 57.64% stake in the bank.

The bank's net profit surged 81.2% to Rs 4189.34 crore on 5.4% rise in total income to Rs 74,457.86 crore in Q1 FY21 over Q1 FY20. The bank's provisions and contingencies increased by 36.1% to Rs 12,501.30 crore in Q1 FY21 from Rs 9,182.94 crore in Q1FY20. Of this, the provision for non performing assets declined by 19.1% YoY to Rs 9,420.46 crore in the June quarter. Provision Coverage Ratio as on 30 June 2020 was 86.32%.

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