Public sector UCO Bank is considering a follow-on public offer (FPO) that will result in government holding in the bank falling from around 64 per cent to 52 per cent.
The bank could raise Rs 500-600 crore during the current financial year depending on the market conditions, UCO Bank Chairman and Managing Director SK Goel said on the sidelines of a Ficci seminar on Monday.
The bank plans to approach the government for the issue in the third quarter of the year when its capital restructuring is over.
“We have a headroom to raise Rs 100 crore equity and at a premium of Rs 40-50, we can raise close to Rs 500-600 crore this year,” said Goel. In March, as part of a capital restructuring, the bank received Rs 450 crore from the government as Tier I capital. The bank is expected to get another Rs 750 crore by next month through preferential allotment of shares.
In December 2008, UCO Bank restructured its equity capital by converting Rs 250 crore out of the total equity capital of Rs 799.36 crore into perpetual non-cumulative preference shares. The restructuring led to the government stake coming down from 74.98 per cent to 63.59 per cent.
After the government infuses Rs 750 crore in the bank, it will have a headroom to raise about Rs 1,600 crore as Tier I and Tier II capital.
At present, the bank’s capital adequacy ratio is 11.95 per cent, which will go beyond 12 per cent after the capital infusion. The bank expects about 25 per cent growth in deposits and credit during 2009-10.
UCO Bank’s FPO was expected last year, but the plan was put on hold due to fall in stock prices.
To reduce deposit rates
UCO Bank is planning to cut interest rates on deposits by 50-100 basis points by next month.
The cut was necessary on account of falling lending rates, which was putting pressure on the bank’s net interest margin (NIM), said Goel. The bank expects an NIM of 2.25 per cent during the current financial year. In the present quarter, the NIM is expected to be 1.95 per cent as against 1.75 per cent in the quarter ended March 2009 and 1.98 per cent during 2008-09.
In the current quarter, the credit growth had been lower than usual, said Goel.
“Our credit growth in the present quarter is not much. It could be about 5 per cent more than in the March quarter. On a year-on-year basis, it could be 17-18 per cent,” said Goel.
However, credit offtake was picking up in infrastructure, automobile, SME, cement, steel and real estate sectors, he said.
The bank expected about 15-20 per cent increase in net profit in the first quarter of the year, mainly driven by good treasury income, non-interest income and recovery, said Goel.
