With bond yields hardening, public sector lender Punjab National Bank on Friday raised Rs 974 crore in capital through additional tier I (AT1) bonds as against an indicative amount of Rs 2,000 crore.
Bond market sources said the coupon for AT1 bonds was firmed up at 8.75 per cent, a level the bank was comfortable with. The call option is available after five years. While the money was available at higher yields there was no urgency to go beyond 8.75 per cent, as the bank’s capital position was comfortable. The base issue size was Rs 500 crore with green issue of Rs 1,500 crore.
Bank had raised over Rs 500 crore via AT1 bonds at 8.4 per cent in December 2022.
Its board had approved a plan to raise Rs 12,000 crore in capital through AT1 9Rs 3,500 crore) and tier bonds (Rs 6,500 crore) in the current financial year. It raised Rs 3,240 crore via AT1 bonds and Rs 4,000 crore through tier II bonds till end of December 2022, according to investor presentation.
Delhi-based PNB’s capital adequacy ratio stood at 15.15 per cent at end of December 2022. The Common Equity tier was 10.84 per cent and AT1 level of 1.37 per cent.
Bond dealers said many finance sector players and corporates have lined up fundraising plans before the close of the financial year (March 2023). This has led to supply glut while demand is limited. Also, liquidity is tight in the market due to a variety of factors including the Reserve Bank of India’s stance, bond dealers said.
Meanwhile, the board of lender slated to meet on March 29, 2023 to consider the proposal for raising of capital in the next financial year Fy24 through issuance of Additional Tier-1 Bonds and Tier-II Bonds. These Basel Ill-compliant bonds could be issued in one or more tranches.