| 530.00 |
| PNB | 361.05 | 279.60 | 329.80 | 10.00 | 21.90 | 1.30 | 1.10 | 429.00 | 520.00 |
| UTI Bank | 188.00 | 70.00 | 87.00 | 21.00 | 21.10 | 2.60 | 2.20 |
- | 220.00 |
| Centurion Bank | 18.00 | 2.20 | 4.20 |
NA | 9.00 | 8.00 | 4.30 |
- | 20* |
| Andhra Bank | 78.25 | 50.00 | 58.00 | 16.00 | 31.50 | 1.60 | 1.30 | 97.00 | 115.00 |
| * Based on FY07E adj. book Source: SSKI estimates |
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| The immediate compulsion for the issues: fast growing asset books and the urgency to meet the Basel II capital adequacy norms - a stringent international standard which states that banks must have a minimum capital adequacy ratio of 12. 5 per cent - by FY07.
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| Consider this: Credit growth in the banking system has been an unprecedented Rs 64,600 crore in the third quarter of FY05. And in two consecutive quarters banks have lent more than Rs 1,00,000 crore - the incremental credit-deposit ratio in the last six months has been over 100 per cent.
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| So, after overloading themselves with government securities for almost three years, bankers are going back to their core business - lending.
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| Since government securities are risk-free and, therefore, require no capital to be held, bankers could manage with the existing capital. But with loan growth picking up, they need to shore up their capital base.
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| Where is the money going? Mainly to retail consumers, who avail themselves of the bulk of these loans. So far, consumers seem to be in no mood to borrow less, especially when it comes to home loans, where tax sops and reasonable asset prices are encouraging people to own their homes.
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| In fact, anxious about ballooning retail credit, the central bank recently upped the capital requirements for such loans to 75 per cent from 50 per cent, though it said it would be only a temporary measure.
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| But, with industry continuing to grow well, as reflected in the higher capacity utilisation of cement or steel units, companies, too, are asking for larger amounts of working capital, including small and medium enterprises (SMEs).
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| Banks today are in far better shape than they were a couple of years ago. Fat profits earned from trading in government securities in a falling interest rate regime have allowed them to clean up their books - essentially by writing off or providing for non-performing loans (NPLs, or dud loans).
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| Today, gross NPL levels of around 7 per cent of advances, and 60-70 per cent coverage levels for bad loans, are a huge improvement over the situation five years ago.
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| More recently, when treasury profits evaporated after the interest rate cycle turned suddenly and sharply, the central bank bailed them out by allowing them to park gilts in what is called the held-to-maturity (HTM) category and take a one-time hit by providing for these losses through the profit and loss account.
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Also, it means they need to keep smaller amounts of money in the Investment Fluctuation Reserve (IFR) - a sum earmarked to cushion losses in treasury trades. HDFC Bank, UTI Bank, Corporation Bank, PNB and BoI have opted to transfer securities to the HTM category and have booked losses on that account.
| Equity issuances on the anvil | | | New issue | Mkt cap
$ mn | %
dilution | Tier-1
Mar
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