Syndicate Bank FPO in 3-6 months

Public sector lender Syndicate Bank plans to come out with its second follow-on public offer (FPO) in three-six months to fund its business growth and meet Basel-II norms, a top bank official said.

In order to augment its capital base, the bank is also planning to raise $175 million through the issue of Medium Term Notes (MTN), for which the bank has appointed Standard Chartered, Citibank and Deutsche Bank as lead arrangers, he said.

Through this FPO, the bank plans to offload nearly 9 per cent stake, which would bring down the government's shareholding in the bank to 57.40 per cent from the current 66.47 per cent.

"We are hoping that the government approval for our FPO will come soon. We expect to come out with the issue in three-to-six months," Syndicate Bank's Chairman and Managing Director C P Swarnkar said.

The bank plans to sell 8-crore shares through the FPO and the issue proceeds would be utilised for growing the bank's business as well as for meeting Basel-II requirements, Swarnkar said.

"The government is giving approvals for the capital raising programmes of other public sector banks. We have also urged for the same, which is necessary for the growth of the bank," he said.

The bank's MTN issue would comprise an issue of perpetual bonds worth $60 million, while the remaining would be exercised as upper tier-II capital, he said.

The bank is planning its FPO at a time when public sector lenders, including State Bank of India, UCO Bank and Union Bank of India, are mulling fund-raising programmes to fuel their business growth and to meet Basel-II requirements.

Finance Minister P Chidambaram had said that the government would consider the capital raising programmes of other public sector banks, along with the rights issue proposal of SBI.

The bank expects a 23 per cent growth by the end of this financial year, while deposits are likely to grow at 22-23 per cent rate during the period, he said.

Syndicate Bank has a branch strength of 2,140 as on December 31. The bank had posted a 21 per cent jump in its Q3 FY 08 net profit at Rs 273.20 crore from Rs 226.11 crore in the year-ago period.

Its total income went upto Rs 2,266 crore as compared to Rs 1,776 crore a year ago. There was a marginal dip in its net interest margin at 2.62 per cent from 2.69 per cent. The bank's net interest income fell to Rs 1,510 crore from Rs 1,546 crore in the corresponding period of the previous year.

Swarnkar attributed the fall in margins to a lower yield on investments and the resulting higher cost on funds, which is largely driven by market-determined parameters.

"The cost of funds have been higher during the fiscal which has exerted pressure on our margins. The yield on investment was also lower as compared to the previous year," he said.