SBI raises Rs 5,000 crore through Additional Tier-I bonds, shares gains over 0.8%

The largest Public sector lender, State Bank of India (SBI), raised Rs 5,000 crore via Additional Tier-I (AT-I) bonds, offering a 7.98% coupon rate. This marks SBI’s first AT-I issuance in FY25, aimed at strengthening its capital base. The bonds, which carry a call option exercisable after 10 years, are designed to comply with Basel-III norms and include provisions for interest payment alterations if certain capital thresholds are breached.

AT-I bonds are high-risk debt instruments, issued by banks to shore up their capital base. They can be converted into equity in the event of extreme financial distress, offering a lower coupon rate compared to the bank’s previous AT-I issuance in January, which was priced at 8.34%.

The issuance had a base size of Rs 2,000 crore with a greenshoe option for an additional Rs 3,000 crore. The bonds are rated ‘AA+’ by Crisil Ratings. SBI Capital Markets Ltd. arranged the issue, with the allotment set for Thursday.

 The Bank has reported a capital adequacy ratio of 13.86%, down by 70 basis points from the previous year, while its common equity tier-1 (CET1) ratio stood at 10.25% as of June 2024. SBI has already raised Rs 15,000 crore through Basel-III compliant Tier-II bonds in FY25 to support its deposit base, which has lagged behind credit growth.

Also, the Indian Bank is preparing to raise Rs 5,000 crore through 10-year infrastructure bonds rated 'AAA' by Care and Crisil, with the issuance set for Thursday. In September, Indian Bank raised Rs 5,000 crore via 10-year bonds at a 7.24% interest rate.

The headline equity benchmarks traded with minor gains in morning trade. The Nifty traded above the 24,400 level. PSU Bank shares extended gains for the second consecutive trading session. The shares of the SBI are trading at over 0.84% at the live session.