SBI raises $500bn in 5-year bonds at 3.25%

State Bank of India (SBI) has raised $500 million overseas through issue of 5-year bonds under its $10 billion medium-term notes programme.

The nation's largest lender hit the international debt market through its London branch with bonds priced at a spread of 145 bps over the 5-year US treasury, bearing fixed interest of 3.25 per cent per annum with interest payable semi-annually in arrears.

All the three international rating agencies have accorded investment grade ratings to the proposed $500-million bond sale by SBI, which has been away from the overseas debt market for some time now.

The bonds are rated Baa3 by Moody's and BBB- by rating agencies S&P and Fitch.

The bond sale will be carried out from its London branch, and the bonds will be listed on the Singapore Stock Exchange, Moody's said in a statement.

SBI said the dollar denominated borrowing will enable the bank meet funding requirement of its international operations.

The issue attracted investors from across geographies with an order book in excess of $1.5 billion across 170 accounts. According to SBI's chairman Arundhati Bhattacharya, the response to the bond offering reflected the strong perception of the bank's credit by the international investor community.

Bank of America Merrill Lynch, Citi Bank, HSBC, BNP Paribas, DBS Bank Ltd, MUFG and SBI Capital Markets acted as Joint Lead Managers for the bond issue.

SBI had in September last year raised $3-million overseas debt through issue of dollar-denominated notes and in February 2014, it had raised $1.25 billion through sale of dollar-denominated  bonds.

The bank has so far raised $3.5 billion out of its $10 billion medium-term note (MTN) programme, including $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 per cent payable semi-annually under $10 billion Reg S bond programme.

According to 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.

SBI also plays a critical role in the country's banking system, accounting for around 16.3 per cent of system loans and 17.6 per cent of system deposits as of March 2016.

Fitch said after this 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 per cent in September 2016.

Fitch said the bank is likely to receive around $835 million in new capital from the government shortly out of the total $1.1 billion earmarked for this financial year, which is around five per cent of its 2015-16 equity and has plans to raise an additional $2.2 billion directly from the market, for which it has received shareholder approvals.

State Bank of India has a total asset size of $353 billion, 16,288 branches in India and 200 international offices in 37 countries and more than 370 million customer accounts.