SBI to raise ~25K cr via bonds to create buffers

State Bank of India (SBI) will raise ~25,000 crore capital through additional tier-1 (AT1) and tier-ii bonds from the market in FY21. This capital is expected to strengthen capacity to grow business and create buffers to withstand shocks.

It will raise AT1 and tier-ii capital by way of issuance of Basel Iii-compliant debt instruments in dollars and domestic currency in the current financial year. SBI, in an exchange filing, said its board had given nod to raise fresh AT1 capital upto ~4,000 crore subject to the Centre’s concurrence. Its directors also gave nod to raise fresh tier-ii capital up to ~10,000 crore. SBI shares closed 1.2 per cent lower at ~183.85 per share on the BSE on Wednesday.

It will redeem existing tier-ii bonds of ~11,015 crore that have call dates during the current financial year. It will replace them by raising fresh tier-ii capital bonds of the same amount. This would be over and above the ~10,000 crore worth of tier-ii capital bonds for which the board has given approval, said SBI.

SBI’S capital adequacy ratio (CAR) stood at 13.06 per cent as on March 31, 2020, with tier-i at 11 per cent. The bank holds capital above the regulatory requirements. At the time of announcing results for FY20, SBI chairman had said the bank does not intend to approach the government or market to raise capital now. However, the bank has an enabling provision to raise up to ~20,000 crore.

According to SBI’S annual report, the bank has been identified as a systemically important bank by the regulator and is required to keep additional common equity tier-1 (CET1) of 0.60 per cent of risk weighted assets. Additionally, it has also started maintaining capital conservation buffer in a phased manner and has to reach the level of 2.5 per cent as on September 30, 2020.