Tamil Nadu-based City Union Bank (CUB) is planning to raise around Rs 1,000 crore over the next three years to support its business target of Rs 50,000 crore by 2013-14. The bank had said, the incremental funds will be raised through rights issue, qualified institutional placements (QIP) or through preferential allotments.
Speaking to Business Standard, N Kamakodi, executive director, City Union Bank said, “If the bank has to grow at the rate of 30 per cent we have to increase our capital over three years.”
In the last three years the bank had raised Rs 200 crore through rights issue and through preferential allotments. “We would require another Rs 1,000 crore incremental funds over the next three years to reach our business target.”
The Kumbakonam-based private bank had set a target of Rs 50,000 crore total business by 2013-14. This includes Rs 27,000 crore deposits and Rs 23,000 crore credit. The bank is likely to close the present fiscal with a total business of Rs 16,500-17,000 crore compared to Rs 13,700 crore last year.
CUB’s networth is around Rs 850 crore presently, and will be increased to Rs 1,000 crore by December 2010, said Kamakodi. The bank which had reported Rs 122.13 crore profit after tax (PAT) in year-ended March 31, 2009, is likely to close this fiscal with a PAT of Rs 150-155 crore.
The target will be achieved mainly through branch expansion. Presently, the bank has 222 branches and had applied licence for another 62 branches with Reserve Bank of India. “Our focus will continue to be the South, especially Tamil Nadu, where for another 10 years we have space to grow,” said Kamakodi.
Of the new branches, 50 per cent will come up in Tamil Nadu, while 25 per cent of them will come up in the other three southern states and 25 per cent across the rest of the country, he added. Recently, the bank opened branches in Madhya Pradesh, Rajasthan, Punjab and Uttar Pradesh. This year the bank plans to open branches at Chhattisgarh and Orissa.
He added, while one-third of the business will come from the existing clients, the rest will come from new branches and new clients. “This will be our fifth year in a row we will grow 20-25 per cent in all parameters,” he said.
For instance, credit growth was 20 per cent for the bank during the present fiscal, while the industry average is around 16 per cent. The bank is likely to close the present fiscal with a credit portfolio of around Rs 6,700 crore.
“We started witnessing pick-up in credit, for instance in June the utilisation was around 58 per cent which has now increased to 80 per cent,” said Kamakodi.
Commenting on NPA, he said, Gross NPA is around Rs 120 crore and Net NPA is around Rs 65 crore. “These NPAs are backed with immovable collaterals, so it is not alarming,” said Kamakodi.
