Canara Bank raises Rs 1,000 crore in capital through AT1 bonds

Public sector lender Canara Bank has raised Rs 1,000 crore in capital through additional tier I bonds (AT 1 bonds) at a coupon of 8.07 per cent to support business growth.

The issue size was Rs 250 crore with a green shoe option of Rs 750 crore. It has a call option in March 2027.

Bond market sources said the interest in the paper by the Bengaluru-based lender was strong with a demand book size of 2.7 times.

The coupon of 8.07 per cent is a fine rate, given the adverse market conditions shaped by volatility. The previous AT1 offering from Canara Bank was priced at 8.05 per cent.

Canara Bank’s Capital Adequacy Ratio (CAR) stood at 14.80 per cent with tier I of 11.58 per cent at the end of December 2021.

Early this week, Union Bank of India raised Rs 1,500 crore in capital via AT1 bonds with a coupon of 8.5 per cent. In January Bank of Baroda had informed BSE it came out with issuance of Rs 1,000.00 crore of AT1 bonds.

Bond dealers said the investor interest in the AT1 bonds floated by public sector banks has been on the rise after substantial improvement in financial profile. In September 2021, rating agency CRISIL had upgraded its rating on Canara Bank’s tier I bonds (under Basel III) from “AA” to “AA+”.

Meanwhile, Chennai-based Indian Overseas Bank (IOB) is planning to raise up to Rs 800 crore in capital through tier II bonds. India Ratings assigned “AA-” rating to the proposed tier II bonds.