South Indian Bank not exercising debt call option unlikely to ruffle large banks - Fitch

South Indian Bank

05/12/2022 03:59

** South Indian Bank's  SIBK.NS  decision to not exercise
call option on its Tier II bonds is unlikely to have major
long-term market implications for the banking sector, Fitch
Ratings says
 
    ** "We believe the action is bank-specific and not
necessarily representative of the broader market, given the
associated reputational risk," the global rating agency says in
a note
    ** South Indian Bank did not exercise a call option, due on
Nov. 28, on its Basel III-compliant 10-year Tier-II bonds 
 
    ** A senior executive at the bank had said the decision was
not due to concerns about the bank's capital levels or due to
concerns over liquidity
    ** Fitch further says, bank's decision influenced by the
prevailing rising interest-rate environment 
    ** South Indian Bank's action could have greater pricing
impact on issues from smaller private banks rather than for
large banks, which are less likely to take such action, rating
agency adds
 
    ** "Refinancing the bond at a rate similar to 2017 would not
have been guaranteed, even though bond yields in the local debt
market are only moderately above November 2017 levels when this
bond was issued," Fitch said.
 
    ** South Indian Bank's action could have greater pricing
impact on issuances from smaller private banks rather than for
large banks, which are less likely to take such action
 (Reporting by Dharamraj Dhutia)
 ((dharamraj.dhutia@tr.com))