 "Canara Bank says it will raise up to Rs 8,500 cr in debt capital in FY25")
Canara Bank plans to raise up to Rs 8,500 crore through additional tier I (AT1) and tier II bonds in the financial year 2024-25 (FY25) to build capital for business growth.
The board of directors has approved raising capital through debt instruments, said the public sector lender in a filing with BSE. Canara Bank’s stock closed 2.56 per cent higher at Rs 118 per share.
The Bengaluru-based lender’s board also approved diluting a 14.5 per cent stake in the Canara HSBC Life Insurance by listing the company on stock exchanges through an initial public offer (IPO). Canara Bank holds a 51 per cent stake in the life insurance company and the IPO would need approvals from the central government and the Reserve Bank of India. The IPO’s size, time and modalities would be decided later.
Canara Bank plans to get up to Rs 4,000 crore Basel III-compliant AT1 bonds and Rs 4,500 crore through Basel III compliant tier II bonds in FY25, subject to market conditions and approvals.
It raised Rs 3,403 crore through AT1 bonds in FY24. Bank officials said debt capital worth Rs 5,700 crore is coming up for maturity or is eligible for a call option in FY25. Tier II bonds of Rs 4,200 crore would mature while AT1 bonds worth Rs 1,500 crore will come up for a call option in FY25.
At the end of March 2024, the bank's Capital Adequacy Ratio (CAR) stood at 16.28 per cent. Of this, Common Equity Tier I (CET1) was 11.58 per cent, AT1 2.37 per cent, and Tier II 2.33 per cent.
Canara Bank’s advances grew 11.34 per cent year-on-year to Rs 9.6 trillion at the end of March 2024 and have guided for 10 per cent growth in FY25.
Also Read
Fitch Ratings, in its rating commentary in April, said it expected Canara Bank's common equity Tier 1 (CET1) ratio to improve moderately on steady internal capital generation.
Canara's business profile score of 'bb+' reflects the bank's strong local franchise and reach. This is counterbalanced by the bank's high-risk appetite, which has weighed on the traditional business model in the past and was partly a result of government influence, similar to other state banks, Fitch said.