Shares of State Bank of India (SBI) ended 1.2% higher at ₹813.70 on the BSE on Monday after the country’s largest lender raised ₹10,000 crore through its seventh infrastructure bond issuance. Last week, the board of the public sector lender had approved a proposal for raising long term bonds up ₹20,000 crore through a public issue or private placement, during the current fiscal.
The PSU bank has raised the debt capital at a coupon rate of 7.23% payable annually for a tenor of 15 years, the bank says in an exchange filing. The instrument is rated AAA with stable outlook by India Ratings and Research and CARE Ratings.
The bank intends to use bonds proceeds to enhance long term resources for funding infrastructure and affordable housing segments, the release notes.
As per the release, the issue garnered an overwhelming response from investors, receiving bids in excess of ₹11,500 crore which was oversubscribed over 2 times against the base issue size of ₹5,000 crore.
“The total number of bids received was 85 indicating wider participation with heterogeneity of bids. The investors were across provident funds, pension funds, insurance companies, mutual funds etc,” the release highlighted.
“This issuance will help in developing a long-term bond curve and encourage other banks to issue bonds of longer tenor,” says C S Setty, Chairman, SBI.
India Ratings has assigned ‘AAA’ rating with stable outlook to the bonds, saying that the rating continues to reflect SBI’s strong franchise with a dominant market share in the Indian banking system. The rating also reflects the bank’s ability to service coupons and manage principal write-down risk on its debt capital instruments. To arrive at the rating, Ind-Ra has considered the discretionary component, coupon omission risk and the write-down/conversion risk as key parameters.
CARE Ratings has also given ‘AAA’ rating with stable outlook, citing majority ownership and expected support from the Government of India (GoI) and the bank’s systemic importance and its dominant position in the Indian banking sector. SBI is the largest commercial lender in terms of business and asset size, with gross advances of ₹37,67,535 crore and deposits of ₹49,16,076 crore as on March 31, 2024. As on September 30, 2024, the gross advances increased to ₹39,20,719 crore and deposits stood at ₹51,17,285 crore.
“Ratings continue to derive strength from SBI’s strong and established franchise through an extensive pan-India branch network and international presence, which helped the bank develop a strong current account savings account (CASA) base, and diversified advances profile with a growing share of retail advances,” CARE says in its report.
SBI’s domestic CASA remained robust at 41%-46% over FY20-FY24, due to, which, its dependence on volatile and high-cost wholesale deposits remains low. The bank’s liquidity coverage ratio was 128% at Q2 FYE25 (FYE24: 129%; FYE23: 146.6%).
For Q2 FY25, the bank reported 28% year-on-year growth in its standalone net profit at ₹18,331 crore for the second quarter ended September 30, 2024. The net interest income (NII) jumped by 5.37% YoY to ₹41,620 crore, while the interest income surged 12.32% YoY to ₹1.14 lakh crore. The operating profit of the lender surged by 51% YoY to ₹29,294 crore in Q2 FY25, from ₹19,417 crore during the same period last year.
On the asset quality front, SBI saw its gross non-performing asset (NPA) improving to 2.13% as on September 30, 2024, as against 2.21% in the previous quarter and 2.55% in the year ago period. In a similar trend, net NPA ratio dropped to 0.53% against 0.57% in Q1 FY25 and 0.64% as on September 30, 2023.
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