Karnataka Bank Ltd, a fast emerging publicly-held private sector bank, has decided to drop plans to raise equity through a rights issue. In the stead, the bank will augment the capital by issue of Tier-2 Bonds.
The bank, headquartered in Mangalore, has a capital adequacy ratio of 12.50 per cent (under BASEL II standards) against a minimum requirement of 9 per cent.
While the capital adequacy under Tier 1 capital is 10.99 per cent, it is 2.06 per cent under Tier-2 capital, a comfortable situation for the bank. It is to boost this capital that the bank may be eyeing to raise around Rs 250 crore through the issue of fresh bonds. The bank had earlier during 2007 raised Rs 350 crore by issuing 10-year bonds for augmenting Tier 2 capital.
The advances by the end of first quarter of FY13 increased Rs 3,591 crore from Rs 18,087 crore to Rs 21,678 crore, registering a Y-O-Y growth of 20 per cent and the bank is expecting to touch the Rs 26,000 crore mark by end of FY13 and so, the need to boost Tier-2 capital.
The net profit during the first quarter of Fy13 grew by 67 per cent to Rs 83.44 crore. Current account, Savings account (CASA) increased by 17 per cent to Rs 7,694 crore.
The bank has been in the eye of major banks who are looking to grow their business, but time and again the management of Karnataka Bank has been denying that the bank is for sale. It is not without a reason that many a large financial institution has been eyeing Karnataka Bank. There has been robust growth in advances during the quarter as depicted by incremental CD Ratio of 102 per cent. The bank earned a total income of Rs 989 crore, registering a growth of 29 per cent. The Operating Profit has increased by Rs 58 per cent to Rs 169 crore.
The net interest income has increased by 47 per cent to Rs 226 crore while the net interest margin also increased from 1.93 per cent to 2.45 per cent.
The Karnataka Bank stock gained 3.3 per cent by 11 am on Monday and is trading at Rs 85.25 a share.
