Canara Bank Looking To Raise Rs 3,500 Crore Via AT-1 Bonds

The AT-1 bonds form a capital buffer for the bank and contribute to its capital strength. While bonds are perpetual in nature and have no maturity date, they typically have a call option at the end of 10 years.

The sentiment around these equity-like instruments had taken a hit globally when Credit Suisse wrote down its AT-1 bonds worth $17 billion earlier this year. In India, Yes Bank Ltd.'s AT-1 bonds worth Rs 8,000 crore were written off as part of its restructuring scheme following the RBI-mediated resolution in 2020.

In September, Canara Bank raised Rs 5,000 crore through the maiden issuance of long-term infrastructure bonds at a coupon rate of 7.54% per annum. However, funds raised through infrastructure bonds are not included in the calculation of the capital adequacy ratio.

In the September quarter, the public sector bank reported a 43% year-on-year rise in its net profit to Rs 3,606.1 crore. The bank's capital adequacy ratio stood at 16.20% as of Sept. 30, with CET-I at 11.58%. The net interest margin during the quarter fell 5 basis points to 3% on a sequential basis.