Singapore: State Bank of India Ltd (SBI), the country’s biggest, hired Citigroup Inc. and JPMorgan Chase & Co. for a $225 million (Rs922.5 crore) debt sale, according to an email sent to investors.
The Mumbai-based bank last sold a perpetual bond in February this year, helping it raise $400 million. The bonds maturing 2017 yield about 7.324 % on Monday, up from 7.03 % when they first traded on 17 February.
SBI may have to offer a higher yield for its new bonds to compete with other Indian banks that are seeking funds. Overseas bond sales by the nation’s banks have more than tripled this year to $4.3 billion, according to data compiled by Bloomberg.
“As supply grows, bonds have to be priced more cheaply to attract investors,” said Clifford Lau, a Singapore-based portfolio manager at Pramerica Fixed Income who helps manage $7.6 billion of emerging market assets. “We are given more options to choose from.”
SBI and other banks in the country are selling bonds to meet accelerating loan demand as the economy expands.
India’s gross domestic product grew an average 8.6% in the past four years. The International Monetary Fund expects India to overtake South Korea this year as Asia’s third-biggest economy, after Japan and China.
Indian companies’ borrowing in dollars, euros and yen may rise to between $8 billion and $13 billion, according to Deutsche Bank AG. Indian companies sold $2.97 billion of overseas debt last year, according to Bloomberg data.
Funds raised will be part of the bank’s tier-I capital, the email said. Tier-I measures banks’ financial strength and consists of the most reliable and liquid capital, such as common and preferred stock.
Banks with overseas branches, including SBI, must meet the so-called Basel II requirement to set aside eight cents for every dollar they lend by March 2008, according to the Reserve Bank of India.
SBI has 52 offices in 34 countries, with branches in New York, London and Hong Kong, according to its website.
The Mumbai-based bank has about $8 billion of outstanding bonds and loans, according to Bloomberg data. The timing of the sale hasn’t been decided and the size is not expected to exceed $225 million, the email said.
State Bank of India is rated BBB- by Standard & Poor’s, its lowest investment grade rating. Moody’s Investors Service rates it Baa2, its second-lowest investment grade.