After State Bank of India’s recent $750-million medium-term note (MTN) issue, the country’s largest private sector lender, ICICI Bank, might be looking at an overseas bond issue.
The lender has lined up a series of meetings in the United States and the United Kingdom next week to gauge investor appetite. It has appointed Bank of America-Merrill Lynch, Credit Suisse and HSBC for investor updates.
The bank recently reworked its $5-billion MTN programme and dropped plans to issue upper and lower Tier-II bonds. It will instead focus on instruments like senior unsecured notes and hybrid Tier-I notes.
The bank is currently well-capitalised with a capital adequacy ratio (CAR) of 17.7 per cent. Its Tier-I CAR is 13.3 per cent, the highest among large Indian banks.
Since the bank is consolidating its loan book at home, it is likely that the funds will be used for international operations and general corporate purposes.
An analyst with a domestic brokerage said lower cost of funds might have prompted ICICI Bank to decide on raising funds abroad and the use of the money was likely to be confined to overseas expansion. In doing so, the bank will not take any exchange rate risk.
Bankers said SBI’s issue would act as a benchmark for other lenders. The issue was priced at mid-swap plus 90 basis points (bps). Mid-swap is the equivalent of Libor (London Inter-Bank Offered Rate) for longer maturity bonds.
Private sector Axis Bank has also started the process of raising at least $ 500 million through an MTN programme. It has hired Barclays, HSBC, JPMorgan Chase and Standard Chartered to help sell the issue. It conducted roadshows overseas in the last week of October.
