State Bank of India will explore the options of a rights issue and follow-on public offer (FPO) to raise more capital as the country’s largest lender targets a 13% loan growth this fiscal, chairperson Arundhati Bhattacharya said on Tuesday.
Although the bank has some cushion to raise Tier-II capital and may not need to raise equity in the next four months, Bhattacharya said: “Everything is on the table. It could be a rights issue or an FPO or a QIP.” In January, SBI raised R8,032 crore through a qualified institutional placement (QIP).
Since some of the PSU banks have to rely heavily on government’s recapitalisation to meet Basel-III norms in the coming years, Bhattacharya has favoured lowering the government holding limit from 58% to 51%. “That’s something that is being discussed at this moment,” she said, hoping that an announcement in this regard would be made in the Union Budget on July 10.
The policy change could help banks like SBI the most, as government holding at the lender is currently 58.6%, leaving little room for it to go for an FPO. In contrast, a rights issue by the bank will put undue pressure on the government, which has to subscribe to 58.6% of the shares to keep its shareholding intact.
Until March 2014, SBI’s capital-adequacy ratio was 12.44%, a tad higher than RBI’s prescribed limit. But higher provisions for NPAs and a lower-than-expected profit growth could put pressure on the CAR in the current fiscal.
Heavy provisioning in the last fiscal brought down SBI’s net NPAs to 2.57% of advances from 3.24% in 2012-13, which, coupled with sluggish income growth, lowered net profit by 22.8% to R10,891.17 crore from R14,104.98 crore in FY13. Still, SBI’s gross NPAs were high at R61,605.35 crore, or 4.95% of advances, at FY14-end.
While admitting that there was ‘no magic wand’ to cut bad loans drastically
in times of a slowdown, Bhattacharya said: “We are seeing some lessening of stress. We are very much in control. As the GDP goes up, demand goes up, the capital market will begin to respond, people are able to raise equity, we will see things becoming better.”
While expecting interest rates to remain ‘stable’ in the near term, she proposed that gold holdings be monetised and treated as part of banks’ cash reserve ratio (CRR), which can help them use the idle cash for more productive lending.
SBI has sought to increase its customer base by a slew of measures, including launching of digital banking initiative, sbiINTOUCH, which offers instant issuance of debit cards, in-principle loan approval and other financial products. SBI has engaged Accenture to develop the digital business strategy, which was inaugurated by finance minister Arun Jaitley in Delhi.
fe Bureau | The Financial Express