 "Three govt-run banks to raise Rs 2,500 crore through bonds")
Three public sector banks (PSBs)— Bank of Baroda (BoB), Allahabad Bank, and Bank of Maharashtra — might soon seek to raise capital through Basel-III compliant tier-I and tier-II bonds.
BoB plans to raise about Rs 1,000 crore through tier-I bonds. The yields have eased substantially and we might tap the market this month, said a senior executive.
On November 26, BoB had told the BSE exchange about a plan to privately place additional tier-I (AT-1) bonds of Rs 1,000 crore, with an over-allotment option of another Rs 500 crore. Then, on November 28, it said it was deferring the issue, without assigning a reason.
Kolkata-based Allahabad Bank would be in the market to raise up to Rs 500 crore through tier-II bonds. CRISIL has assigned a 'AA+/Negative' rating to the proposed offering. Fitch, the global rating agency, said on Friday that public sector banks would face challenges in accessing core equity, as the share prices of many were trading below book value. As such, PSBs will likely have to continue relying on AT-1 hybrid instruments to strengthen capitalisation in the short term, despite the government's planned selldowns.
Thus far, state banks have been slow in issuing AT-1 capital, with only two issues of Rs 2,500 crore ($400 million) each — Bank of India in August and IDBI Bank in October. Combined, these two issues constitute roughly five per cent of Fitch's estimated total AT-1 requirement through to 2016.
There is uncertainty regarding the ability of the domestic market on its own to fulfill the AT-1 requirement of Indian banks, Fitch said.
BoB plans to raise about Rs 1,000 crore through tier-I bonds. The yields have eased substantially and we might tap the market this month, said a senior executive.
On November 26, BoB had told the BSE exchange about a plan to privately place additional tier-I (AT-1) bonds of Rs 1,000 crore, with an over-allotment option of another Rs 500 crore. Then, on November 28, it said it was deferring the issue, without assigning a reason.
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Pune-based Bank of Maharashtra looks to garner up to Rs 1,000 crore through tier-I bonds. Rating agency CRISIL has assigned its 'AA-/Stable' rating to the instrument.
Kolkata-based Allahabad Bank would be in the market to raise up to Rs 500 crore through tier-II bonds. CRISIL has assigned a 'AA+/Negative' rating to the proposed offering. Fitch, the global rating agency, said on Friday that public sector banks would face challenges in accessing core equity, as the share prices of many were trading below book value. As such, PSBs will likely have to continue relying on AT-1 hybrid instruments to strengthen capitalisation in the short term, despite the government's planned selldowns.
Thus far, state banks have been slow in issuing AT-1 capital, with only two issues of Rs 2,500 crore ($400 million) each — Bank of India in August and IDBI Bank in October. Combined, these two issues constitute roughly five per cent of Fitch's estimated total AT-1 requirement through to 2016.
There is uncertainty regarding the ability of the domestic market on its own to fulfill the AT-1 requirement of Indian banks, Fitch said.