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Canara Bank will consider raising funds through the qualified institutional placement (QIP) route or through preferential allotment during the current financial year. The publicly held bank said this fund-raising would be to meet Basel-III guidelines and also to fund the general business needs of the bank. The bank’s board has constituted a committee of directors to decide on the modalities of the two options.
Canara Bank received Rs 500 crore from the government recently. The bank continues to face asset quality challenges and has a restructuring pipeline of Rs 3,300 crore. Its gross non-performing asset (NPA) ratio stood at 2.8 per cent in December 2013 quarter and analysts expect it to surge to 3.8 per cent in FY15.
The bank’s (current account and savings account) ratio is relatively weaker at 23.1 per cent, making it vulnerable to high interest rates. The bank’s strategy of aggressively growing loans with focus on small and medium enterprises and retail segment along with its low base rate is likely to put financials under pressure, believe analysts. The CAR is at 9.8 per cent as of December 31, 2013.
This announcement by Canara Bank to raise funds through QIP or through preferential allotment came hardly a month after it said it planned to raise Rs 1,000 crore from bonds to fund business growth. The bond committee during late March decided to raise additional capital of Rs 1,000 crore through issue of Basel-III compliant tier-II bonds. In January, the bank had raised Rs 1,500 from bonds to enhance capital base.
The bank for the quarter ended December 31, 2013, had reported a 42 per cent decline in net profit at Rs 409 crore, compared with a year ago. Total income had gone up 16.45 per cent to Rs 10,935 crore. The return on assets (annualised) came down to 0.37 per cent in December 2013 from 0.82 per cent in the corresponding quarter last year. The net non-performing assets went up marginally to 2.39 per cent in December 2013 from 2.35 per cent in the year-ago quarter.
