Bank AT1 products are attracting investor interest because of their appealing coupons. The largest lender in the nation, State Bank of India, raised Rs 6,872 crore last month at a cut-off of 7.75 % through AT1 bonds.
In terms of capital adequacy as of June 30, 2022, BOI has a tier-I capital adequacy of 13.27 % and a tier-II capital adequacy of 2.34 %. The bank has a policy to keep capital adequacy levels above the 14% benchmark. In other words, it would prevent CAR from falling below 14%. According to bank officials, with a floor of 14% CAR, the growth buffer is 1.5%. The need for credit is still high, and the bank will require more cash to fund credit expansion. Hence, efforts are being made to raise more money.
Up until the end of June 2022, BOI’s total advances increased by 15.20% year over year (YoY) to Rs4,77,746 crore. Domestic advances increased 9.72% to Rs4,01,210 crore out of this total. Data from the RBI show that up until the beginning of October 2022, credit in the banking system increased by 17.9% YoY.
The bank has the option of raising capital through the issuance of new equity shares, but officials noted that this would increase the number of shares that are floaters on the market and put pressure on the stock price. The price of BOI’s stock is already below the price of Rs62.89 per share at which it received Rs2,550 crore in equity capital through a Qualified Institutional Placement last August (Rs 58.65 on October 28, 2022).
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