Dena may raise Rs 350 cr in FY09

BANKS GEAR UP FOR BASEL-II

Dena Bank is likely to raise Rs 300-350 crore capital in the next financial year to maintain a 24 per cent credit growth, according to P L Gairola, the chairman and managing director of the bank.

"However the cost of raising capital is important," he said.

Dena Bank's capital adequacy ratio (CAR) would be a little over 11 per cent at the end of March, including the tier-I capital adequacy ratio of 7 per cent, he said.

"You need to have at least 6 per cent tier-I capital adequacy ratio," Gairola said, hinting at the need for equity capital.

The bank is constrained from raising equity capital as the government stake in the bank is at the minimum threshold of around 51 per cent.

Gairola also hopes that the bank will be able to sustain a net profit growth of 25-30 per cent in the next three to five years.

The bank had posted an extraordinary 176 per cent year-on-year net profit growth in 2006-07 due to a low base.

FOCUS FY09
Dena Bank would continue to focus on retail lending in the next financial year beginning April because of "good yield and risk disbursal," Gairola said. The bank might also reduce deposit rates in April if liquidity improves, he said.

"We hope to regain 3 per cent net interest margin next year (2008-09)," Gairola said. The bank's net interest margin is expected at 2.8-2.9 per cent by the March-end.The bank expects to maintain a fee income growth of 22-23 per cent in 2008-09.

TREASURY GAIN
The bank is expected to post a sharp rise in its treasury profit for this financial year ending March 2008 on the back of healthy equity trading profit made in early part of the year, according to Gairola.

However, following the recent crash in the stock market, the bank was likely to provide Rs 5-6 crore as depreciation on its equity trading portfolio in the January-March period, he said.

In the April-December period, Dena Bank's treasury gain was Rs 81.540 crore compared with Rs 36.22 crore a year ago. The treasury gains included Rs 38.44 crore of equity trading profit in April-December compared with Rs 14.24 crore a year ago. The bank has no plans to revalue its property now.

"We did it in 2005. We don't want to do it again so soon. We have very good properties in prime locations, though I know it will help to increase capital as 45 per cent of the revaluation directly gets added to tier-II," he said.