The bank expects to meet 20% deposit and 23% credit growth, says CMD.
Public sector lender Union Bank of India on Wednesday said it may go for a follow-on public offer (FPO) or a rights issue after the government’s planned infusion of capital in it.
“After the capital infusion, we will be comfortable. It gives us an opportunity to go for a FPO or a rights issue at a future date,” said MV Nair, chairman and managing director.
The government is likely to infuse Rs 1,150 crore. With this, the tier-I capital will go up to 8.7 per cent. Accordingly, government holding will increase to 58 per cent from 55 per cent. The capital adequacy ratio was 12.53 per cent at the end of September.
The bank is planning to raise up to $200 million (Rs 900 crore) from markets abroad in the next two months, through a bond issue. “We are planning to raise another $175-200 mn of medium-term notes in the next two months. We have held a road show in Switzerland for this purpose,” said Nair. The bank had raised $400 mn from medium-term notes and $175 mn from bonds in the past four months.
Whether the funds would be raised through Swiss francs, dollars or euro-denominated bonds is to be decided later, he said. The money would be used for funding the Hong Kong business, he said.
The CMD said a further rise in deposit rate would depend on the growth in deposit mobilisation. He expects liquidity to improve with the increase in government spending, pick-up in deposit growth, open market operations and reduction in the Statutory Liquidity Ratio.
The bank expects to meet 20 per cent deposit growth and 23 per cent credit growth by the end of this financial year. “Now our credit growth is at 25 per cent, while deposits are growing by 20.3 per cent,” Nair added.
Union Bank shares went up by 2.2 per cent to Rs 333.35 on Wednesday from its previous close at the Bombay Stock Exchange.
