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SBI raises $500 million from overseas bond sale

State Bank of India on Tuesday raised US$ 500 million through an international bond sale of five- year bonds at coupon of 3.306% per annum and getting oversubscribed three times.

“The pricing offers a spread of 145 bps over the five-year US treasury, which is equivalent to a price of 99.744% yielding 3.306% per annum,” SBI said in a note late evening after successfully closing the issue through its London branch. The order book came in at US$ 1.5 billion for an offer of US$ 500 million, SBI said, adding the issue has been rated at investment grade by all the three big rating agencies.

The offering which will be listed on the Singapore Stock Exchange, will be denominated in US dollars, and will bear fixed interest of 3.25% per annum with interest payable semi-annually in arrears. The bonds will mature on January 24, 2022, the bank said, adding the just concluded bond sale is part of its US$ 10-billion medium term note programme under which is has already raised US$ 3.5 billion.

“The transaction saw strong interest from investors across geographies with an order book in excess of US$ 1.5 billion across 170 accounts, underscoring SBI’s strong credit profile and its position as the nation’s largest bank,” the bank said.

On the successful pricing of the issue, chairperson Arundhati Bhattacharya said, “We are pleased to see the robust demand for our transaction and the strong perception of our credit by the international investor community.” “The execution process was swift and ensured a strong momentum to our transaction. The lead managers have provided us with the right pricing strategy to help us achieve our targets for this fund raising exercise,” she added. Bank of America Merrill Lynch, Citigroup, HSBC, BNP Paribas, DBS Bank, MUFG and SBI Capital Markets acted as joint lead managers to the issue.

The benchmark issue, under RegS of the US Securities Commission regulations has got investment grade ratings from all the three big three international rating agencies. SBI has been away from the overseas debt market for quite some time now. It’s overseas debt deal was a US$ 300 million US$ notes last September. In February 2014, the bank had raised US$ 1.25 billion in another dollar money sale. The bank has so far raised US$ 3.5 billion out of its US$ 10 billion MTN programme, including US$ 400 million in perpetual bonds. The bank had also concluded AT1 Basel III- compliant non-convertible, perpetual non-call five-year subordinated, unsecured notes at a coupon 5.5% payable semi-annually under US$ 10 billion RegS bond programme.

While Moody’s assigned Baa3 rating to the senior unsecured notes, Fitch has assigned ‘BBB-‘ ratings in line with their sovereign ratings, and S&P assigned BBB- rating. “The issue will at all times rank pari passu among themselves and with all other unsubordinated and unsecured obligations of State Bank,” Fitch said. Assigning ‘BBB-‘ long-term issue rating in line with the sovereign rating, S&P said the rating reflects the long- term counterparty credit rating on SBI.

As per Moody’s, SBI’s final Baa3 rating incorporates a one-notch uplift due to its assumption of the bank’s very high level of support from the government in a stressed situation. The assumption of high government support is based on a combination of SBI’s large size and the critical role it plays in the country’s banking system, representing around 16.3% of system loans and 17.6% of system deposits as of March 2016, its nationwide reach, and government’s 60.18% ownership in it.

Fitch said post-issue, SBI’s core capitalisation is set to improve in the year to March 2017 from a core equity tier 1 ratio of 10.3% in September 2016. Fitch expects SBI to receive around US$ 835 million in new capital from government, which is around 5% of its 2015-16 equity and has plans to raise an additional US$ 2.2 billion directly from market. SBI has an asset size of US$ 353 billion, with 16,288 branches, 200 international offices in 37 countries and over 370 million customer accounts.