 "SBI to raise up to Rs 11,100 cr through Tier-I bonds")
State Bank of India is planning to raise capital of up to Rs 11,100 crore through additional Tier-I (AT-1) bonds from domestic and international investors.
The committee of directors for capital raising has approved a proposal to raise capital for Basel-III-compliant Tier-I bonds through tranches, SBI told the stock exchanges.
The bank would issue Tier-I bonds in one or more tranches to domestic and international markets. It might opt for public offering or use private placement route for raising capital. However, SBI did not specify when the first issue would be.
SBI executive said the capital raised in hard currency (US dollar) would be retained abroad to meet regulatory capital requirement for international loan portfolios. None of the Indian banks has issued AT-1 bonds abroad till date. Meanwhile, merchant banking sources said four foreign banks, including HSBC and Citi, are in the fray to bag the mandate for the offering. Bank may firm up mandates this week.
Besides rising capital from Tier-I bonds, SBI will receive Rs 7,575 crore from the government in the form of equity this year. SBI's capital adequacy ratio (CAR) was 14.01 per cent in June 2016 while it was 12 per cent a year ago. Out of 14.01 per cent, Common Equity Tier-1 (CET-1) was 10.71 per cent in June 2016, while CAR was 12 per cent with CET-1 of 9.59 per cent a year ago.
SBI's capital adequacy ratio improved substantially in the first quarter of FY17 due to gains from revaluation of real estate assets. It boosted Common Equity Tier I capital (CET-1) by Rs 14,383 crore (about 72 basis points).
Flagging caution over the AT-1 bonds issued by public sector ratings, rating agency ICRA said the risk of servicing the coupon payments on AT-1 bonds has increased considerably, especially for the weaker public sector banks. This follows the large losses reported in the last few quarters during FY16 and also in Q1 FY17, resulting in significant depletion of revenue reserves.
Cumulatively, public sector banks have issued close to Rs 17,000 crore of Basel III-compliant Additional Tier-1 (AT1) bonds. The volume of AT1 issuance has so far remained much lower than the banks' capital requirements under Basel-III norms, on account of weak investor appetite.
