SBI to raise ~8,000-crore capital via AT1 bonds in Q4

State Bank of India plans to raise capital worth ~8,000 crore through additional tier-I bonds (AT1 bonds) by March 2018. The board of directors of the country’s largest lender has given a nod to raise additional tier-I capital (AT1) of ~8,000 crore through BaselIII-compliant debt instruments, SBI said.

State Bank of India plans to raise capital worth ~8,000 crore through additional tier-I bonds (AT1 bonds) by March 2018.

The board of directors of the country’s largest lender has given a nod to raise additional tier-I capital (AT1) of ~8,000 crore through Basel-III- compliant debt instruments, SBI informed the BSE.

The lender has an option to issue bonds, in domestic and international markets in rupee and US dollar, till March 31, 2018. The bank could also issue masala bonds to international investors for raising AT1 capital.

SBI executives said though the bank has comfortable capital adequacy ratio, it would look for AT1 capital-raising option, as old Basel-II compliant bonds were maturing over a period. Moreover, the current share of AT1 capital in tier-1 capital was small, leaving room for fresh bond issuance.

Its capital adequacy ratio (CAR) was 13.56 per cent at the end of September 2017, with common equity tier-I at 10.24 per cent and AT1 level of just 0.72 per cent.

SBI raised equity capital worth ~15,000 crore through qualified institutional placement in June 2017. It also raised capital worth ~2,000 crore through AT1 bonds in the second quarter of the current financial year (FY17).

On the effect of sharp a rise in yields on benchmark government bonds in the third quarter, SBI executives said yields might come off current levels of 7.2-.27 per cent in the fourth quarter.