This is SBI’s third Tier 1 bond issuance in the current financial year. The tenor of these bonds is perpetual with a call option after 10 years and every anniversary thereafter.
“The issue attracted an overwhelming response from investors with bids of Rs. 4537 crores and was oversubscribed by about 2.27 times against the base issue of Rs 2000 crores. The total number of bids was 53 indicating wider participation. The investors were across provident & pension funds & insurance companies,” SBI said.
The bank has decided to keep Rs 3,717 crore of the amount. The coupon rate is at 66 basis points above the government securities par curve on Wednesday, tighter than the 71 basis points above the curve it paid when it raised similar bonds last time in February. One basis point is 0.01 percentage point.
The latest issue will SBI diversify and raise long term capital with call option of more than 10 years, helping the bank in managing its capital adequacy effectively.
“Of the total outstanding of the bank’s additional Tier 1 bonds of Rs 49,842.70 crores, AT1 bonds with a call option of 5 years is at Rs 41,581.70 crore and AT1 bonds with a call option of 10 years is Rs 8261 crores. We believe that this issuance may help in developing a long-term Additional Tier 1 bond curve and encourage banks to effectively manage their Additional Tier 1 capital,” SBI said.
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