SBI raises Rs 7,500 cr through tier 2 bonds for regulatory requirements

The country’s largest lender State Bank of India, has raised Rs 7,500 crore capital through Tier-II bonds to meet regulatory requirements and support business growth.

The Public Sector Lender said the coupon rate for Tier-II bonds with a 15-year tenor is 7.42 percent. These bonds have a call option after 10 years and on each anniversary date thereafter.

It had raised Rs 10,000 crore through Tier-II bonds at a coupon rate of 7.81 percent in the last financial year (FY24).

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C S Setty, its new chairman, said that wider participation and heterogeneity of bids demonstrated the trust investors place in the country’s largest lender. He took charge today after Dinesh Khara was demitted from office on the completion of his term.

The issue attracted an overwhelming response from investors, with bids over Rs 8,800 crore against the base issue size of Rs 5,000 crore. Based on the response, SBI decided to accept Rs 7,500 crore at a coupon rate of 7.42 per cent, the bank said.

It has approval from its board to raise up to Rs 25,000 crore capital by issuing Basel III-compliant Additional Tier-I Bonds and Tier-II Bonds to domestic and overseas investors. SBI’s Tier-II bonds carry a “AAA/stable” rating from ICRA.

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The total number of bids received was 70, indicating wider participation with heterogeneity of bids. The investors were across provident funds, pension funds, mutual funds, and banks, the bank said.

SBI had a capital adequacy ratio of 13.86 percent as of June 30, 2024, down by 70 basis points from a year ago. The Common Equity Tier-I (CET1) ratio was at 10.25 percent, the Additional Tier-I ratio was 1.63 percent, and the Tier-II ratio was 2.08 percent.

ICRA assigns the “AAA” rating to Tier-II bonds of SBI that has a healthy capital profile with sizable value-unlocking opportunities from non-core businesses.

The bank’s standalone capitalization profile remained comfortable – CET I of 10.25 percent as of June 30, 2024, against the regulatory requirement of 8.60 percent despite the strong 15.9 percent year-on-year growth in net advances in Q1 FY25.

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