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

Canara Bank is looking to raise Rs 3,500 crore via the issue of additional Tier-I bonds, according to a person with knowledge of the matter.

For the issue, the AT-1 bonds have a face value of Rs 1 crore each. The issue size is Rs 1,000 crore, with a greenshoe option of Rs 2,500 crore. The bidding will open on Thursday, as the person quoted above said on the condition of anonymity.

In June, the bank's board of directors approved a Rs 7,500-crore fundraising plan for the financial year, out of which Rs 3,500 crore were to be raised through AT-1 bonds and the remaining Rs 4,000 crore through Tier-II 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.