State Bank of India (SBI) on Tuesday said it had concluded its issue of dollar-denominated senior unsecured notes worth $500 million, having maturity of five years and a coupon of 3.25%, to be paid semi-annually.
State Bank of India (SBI) on Tuesday said it had concluded its issue of dollar-denominated senior unsecured notes worth $500 million, having maturity of five years and a coupon of 3.25%, to be paid semi-annually. The bonds will be issued through the bank’s London branch on January 24 and will be listed on the Singapore Stock Exchange.
This is the first time in the current financial year that SBI has tapped the dollar bond market for funds. Subsequent to reviewing the final issue document, credit rating agencies – Moody’s and S&P Global Ratings – have assigned ‘Baa3’ and ‘BBB-‘ ratings to the issue, which is a part of the SBI’s $10 billion medium-term note programme.
Moody’s, which has a positive outlook on its rating, said the rating was based on SBI’s ‘ba1’ baseline credit assessment (BCA) and the rating agency’s own assessment is that the state-owned lender is likely to receive a “very high level of support” from the government in a stressed situation. “SBI’s BCA of ba1 is underpinned by the bank’s solid franchise as India’s largest bank by assets and deposits, as well as its strong core earnings (pre-provisioning profits) profile and stable capital levels,” Moody’s said.
“The assumption of high support is based on a combination of its large size and critical role in India’s payment system, representing around 16.3% of system loans and 17.6% of system deposits as of end-March 2016, its nationwide reach, and the government’s 60.18% stake in State Bank of India,” Moody’s said. However, the Singapore-based rating agency also said while SBI’s underlying asset quality has now stabilised, the BCA takes into account residual asset quality issues, and the associated impact of high credit costs on the bank’s profits as it rebuilds its provision coverage.
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Speaking about the downside risks to the issue’s ratings, Moody’s said SBI’s BCA could fall if its asset quality worsens substantially from the current levels, or if the bank’s core earnings fall to an extent where it would impact its ability to support a rise in credit cost.