PNB raises Rs 974 cr via AT-1 bonds at 8.75% coupon

State-owned lender Punjab National Bank on Friday raised Rs 974 crore via additional tier-1 bonds at 8.75% coupon rate, which is 35 basis points (bps) higher than its previous bond sale in December, according to sources aware of the matter.

This was the first big issue of AT-1 bonds by a large bank in India after the crisis at Credit Suisse raised concerns on the risk associated with such instruments.

“We received bids for full book, for more than Rs 2,000 crore, but some investors bid at higher rate so we accepted only Rs 974 crore at 8.75%…,” a PNB source told fe.

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PNB did not respond to queries till press time.

The bank had planned to raise up to Rs 2,000 crore via AT-1 bond auctions, with the issue’s base size being Rs 500 crore and green shoe option of Rs 1,500 crore.

The bonds are rated “AA+” by India Ratings, and “AA” by CARE Ratings. AT-1 bonds are perpetual in nature and have a call option after five years.

Since these bonds have a 100-year maturity period, they are called perpetual in nature.

“In spite of negative global market sentiments, the PNB issue was oversubscribed with 21 institutional investors and the issuer has raised Rs 974 crore at 8.75%.

“The issue pricing is marginally higher than their previous issue which is only due to previous two repo hikes and the tight liquidity in March,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap, a fixed income advisory firm.

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“The increase in spreads are similar across all domestic bonds. Hence, there is little or no impact on global turbulence.

“Further, it is to be noted that Indian banks are now resorting to direct marketing with large investors to achieve finer pricing,” he added.

Including PNB’s latest fund raise, so far in FY23, Indian banks have raised Rs 34,394 crore via

AT-1 bonds.

UCO Bank has raised Rs 500 crore at 9.50% coupon rate while State Bank of India (SBI) raised Rs 3,717 crore at a coupon of 8.25% earlier this month, Bloomberg data showed.

In February, SBI raised a tranche of Rs 4,544 crore at a coupon of 8.20%, the data showed. In FY22, Indian banks had raised a record Rs 41,569 crore through AT-1 bonds, sharply higher than Rs 18,723 crore raised during the previous fiscal.