Punjab National Bank plans Rs 1,000 cr AT-1 bond issue to boost capital | Popgen Tech

Public sector lender Punjab National Bank (PNB) plans to raise up to Rs 1,000 crore in capital through additional tier 1 (AT1) bonds. The proposed offer comes just after it raised Rs 4,000 crore through tier II bonds in early December.

Managing director (MD) and chief executive officer (CEO) A Goel said that while the capital adequacy is higher than the regulatory norms, the bank wishes to maintain an adequate pool of capital to support credit growth.

The cost of paying the coupon on level 1 bonds, a form of debt, is less than servicing the equity capital.

The Delhi-based lender’s capital adequacy ratio (CAR) stood at 14.74 per cent with Common Equity Tier 1 (CET-1) at 10.88 per cent and AT1 at 1.32 per cent. -percent at the end of September 2022. The level of level II was 2.54 percent.

The bank already has board approval to raise capital worth Rs 12,000 crore. Of this, Rs 5,500 crore is tier 1 capital and Rs 6,500 crore tier II capital, Goel said. Of the Rs 5,500 crore, it has already raised around Rs 2,658 crore of tier 1 capital in the last quarter ending September 2022.

It has raised Rs 4,000 crore in tier II capital with a coupon of 7.89 per cent by allocating bonds on December 1, 2022.

Goel said the tier 1 offering will have a base size of Rs 500 crore and a green shoe option of Rs 500 crore.

The actual amount and timing of the bond offering will depend on market conditions.

Retained profits in FY23 are added to capital (equity). This will further improve the CAR. The bank estimated 9-10 percent growth in retained profits.

Meanwhile, State Bank of India (SBI) is also looking to raise capital through tier 1 bonds.

In September 2022, SBI issued AT1 bonds worth Rs 6,872 crore with a coupon of 7.75 percent. Other lenders that raised tier 1 bonds during the current financial year include HDFC Bank (Rs 3,000 crore), Bank of India (Rs 1,500 crore) and Canara Bank (Rs 4,000 crore).

Gross PNB advances rose 12.84 percent year-on-year (YoY) to Rs 8.3 trillion at the end of September 2022. Guidance for credit growth of 12-13 percent this financial year.