SBI defers $1.7 billion bond issuance amid high yields, plans to reassess in FY25; stock edges lower

Shares of State Bank of India (SBI) declined nearly one percent on Monday, March 17, following reports that the country's largest lender by assets has decided to delay its bond issuance plans for the current fiscal year. Despite a policy rate cut and ample liquidity infusion by the Reserve Bank of India (RBI), the bank remains cautious due to elevated bond yields, opting to revisit its fundraising strategy in the next financial year.

SBI Shelves Bond Issuance Plans for FY24

SBI had initially planned to raise up to ₹150 billion (approximately $1.7 billion) through bond sales before the end of March. However, due to persistently high yields, the bank has postponed the move, with plans to explore the market in the upcoming fiscal year starting April, according to a Reuters report.

"The bank has been waiting for an opportune time to enter the market, but yields have stayed high for the last several weeks, and hence the bank is avoiding tapping the market in the near term," a source cited by Reuters stated.

Despite the RBI cutting the policy repo rate by 25 basis points and infusing significant liquidity, yields on India's AAA-rated 10-year corporate bonds have risen by 15 basis points since early February. This unfavorable market condition has led SBI to reassess its asset-liability position and defer the bond issuance despite having board approvals in place, a second source confirmed to Reuters.

Fundraising to Resume in FY25

SBI's planned fundraising included ₹50 billion through Basel III-compliant additional Tier-I perpetual bonds and ₹100 billion via 15-year infrastructure bonds. The bank had previously raised ₹50 billion at 7.98 percent in October through perpetual bonds.

Meanwhile, other state-run banks such as Bank of India, Punjab National Bank, and Bank of Maharashtra managed to raise ₹72.52 billion in infrastructure bonds in February, though this was just over half of their intended target.

Going forward, a source told the media firm that SBI is expected to reassess its funding needs in FY25, keeping a close watch on bond market conditions. With yields still elevated, the bank's cautious approach highlights the broader challenges faced by financial institutions in the current interest rate environment. Investors will now await further updates on SBI’s fundraising strategy as the new fiscal year approaches.

Stock Price Trend

The stock fell 0.7 percent to its day's low of ₹722.45. It is now almost 21 percent away from its 52-week high of ₹912.10, hit in June 2024, meanwhile, it has advanced over 6 percent from its 52-week low of ₹679.65, recorded earlier this month.

The bank stock has been flat in the last 1 year. Moreover, it has added 5 percent in March so far after 3 straight months of losses. It fell 11 percent in February, almost 3 percent in January and over 5 percent in December.

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