Canara Bank to raise $300 m hybrid capital

Canara Bank will raise $300 million hybrid capital, comprising upper tier-II and perpetual bonds (tier-I capital), in November 2006 to augment its capital base.

"We will raise capital of $200 million through upper tier-II bonds and $100 million in tier-I," Canara Bank Chairman and Managing Director M B N Rao told reporters on the sidelines of a banking summit organised by the Federation of Indian Chambers of Commerce and Industries and Indian Banks' Association here on Tuesday.

The capital raised from these (overseas) bonds would be used for the public sector bank's international operations. The bank would look for fine rates linked to London Inter Bank Offered Rate, Rao said. It has appointed Citigroup, UBS, HSBC and ABN Amro for the proposed plan to raise capital.

The bank has already raised capital of Rs 1,075 crore in the domestic market till date. Its capital adequacy as on June 30, 2006, stood at 11.02 per cent against 12.51 per cent a year ago.

Meanwhile, Dhanalakshmi Bank has announced to improve its networth to Rs 350 crore by June 2007 from the current level of Rs 150 crore. The bank's move is in step with Reserve Bank of India's (RBI) stipulation to have a minimum networth of Rs 300 crore.

At present, the Kerala-based private sector bank is in the market with the issue of Rs 17 crore tier-II bonds to shore up capital adequacy. It is in the process of appointing an adviser to draw up a plan to raise the capital, its executive director V S R Murthy said.

Recently, RBI had asked Dhanalakshmi Bank to reduce the dividend payout for 2005-06 from 7 per cent, proposed originally, to 5 per cent to retain part of the profits to improve its networth.

The capital adequacy ratio of Dhanalakshmi bank at the end of the first quarter was 9.45 per cent, just above the minimum regulatory requirement of 9 per cent.