ICICI Bank raises $750 million as Indian banks tap dollar bond market

ICICI Bank has raised $750 million by selling five year bonds to investors at 105 basis points above the five year US treasury, its second dollar bond within a month.
The final bond pricing is expected to be around 5.42% coupon as the five year US treasury was trading at about 4.37%.

"The bank capped its requirement at $750 million just after the final price guidance was released. The final price is tighter than the 130 basis points over US treasury inital estimate," said a person aware of the details. One basis point is 0.01 percentage point.


This is ICICI's second dollar month in less than a month. In July, India’s second-largest private sector lender, raised $1 billion through a similar five-year bond, its first public dollar bond issuance since 2017.

That bond remains the largest in the ongoing rush of bank bond issuances from India as banks prop up their dollar funds to support their foreign currency deposit schemes under special Reserve Bank of India dispensation.

ICICI's latest bond was priced slightly higher than the spread of 100 basis points (bps) over the five-year US treasury yield, that it raised in July.

"This time too we have seen real money demand from asset managers and pension funds. Last time there was strong demand from the US which cornered 40% of the offering. This time demand has been strong with the order book at more than $2.2 billion," said the person cited above.

An ICICI spokesperson did not reply to an email seeking comment.

Standard Chartered, HSBC, Bank of America, MUFG and Citibank are among the bankers to the issue.

Separately, two other private sector banks Kotak Mahindra Bank and Yes Bank are also marketing bond issues ranging from $ 400 million to $ 500 million. Both these banks may price their bond issues this week if market conditions remain conducive, people familiar with the details said.

For Kotak this is a debut bond issue in the international market while Yes Bank returns to the market after its debut sale back on 2018 and in a new avatar post a RBI backed restructing.

On Friday, S&P Global Ratings assigned a 'BBB' long-term issue rating to Kotak's proposed to issue under its $1 billion global medium-term note program putting it on par with India sovreign investment grade rating.

"We have equalized the rating on the notes with the issuer credit rating on Kotak Mahindra Bank (BBB/Stable/A-2). This reflects our expectation that the notes shall always rank equally with all of the bank's other senior unsecured obligations. The notes will constitute direct, unconditional, unsubordinated, and unsecured obligations of Kotak Mahindra Bank," the rating agency said. A Kotak spokesperson did not reply to an email seeking comment.

Yes Bank on the other hand has been rated a notch lower at BB+ largely gaining strength from Japanese giant Sumitomo Mitsui Banking Corp (SMBC) which owns 24.9% in the bank purchased last year.

"The ratings get one notch of uplift for potential extraordinary support from SMBC. We believe SMBC will provide extraordinary support to Yes Bank if required in times of financial stress. This reflects our view that the bank is a moderately strategic affiliate of SMBC, given its operations in the Indian market, which is a high priority growth corridor for SMBC," S&P Global said.

A Yes Bank spokesperson also did not reply to an email seeking comment.

The Yes Bank bond is also the bank's first international issue since it wrote off additional Tier 1 bonds as part of the State Bank of India led rescue efforts in March 2020.

S&P Global said it could lower the rating on Yes Bank if its rapid growth and unseasoned loan book significantly weaken its asset quality below the industry average.

"We could upgrade Yes Bank if the bank's strategic importance to SMBC further strengthens, for instance as represented by a step increase in SMBC's stake in the bank or increasing reputational linkage through brand and name sharing," S&P said.