Federal Bank plans to go for acquisitions from 2004-05

Federal Bank, one of the old generation private sector commercial banks, has decided to go for acquisition of other banks from 2004-05 onwards, according to chairman and chief executive officer K.P. Padmakumar.

“We are open to acquisitions but will go for it only from the beginning of the financial year of 2004-05 after we achieve our desired capital adequacy ratio,” Padmakumar told reporters here. According to him, the ideal capital adequacy ratio that his bank should achieve before going for acquisitions will be somewhere between 14 per cent and 16 per cent. He said that as of December 2002, Federal Bank’s capital adequacy ratio stands at 9.46 per cent. “We are raising Rs 150 crore of Tier-II capital through private placement of bonds. Post-issue, Federal Bank’s capital adequacy ratio will improve to 11.72 per cent,” Padmakumar said. He said that after this bond issue, by the end of the current financial year of 2003-04, Federal Bank will go for another round of raising Tier-II capital of Rs 50 crore through a fresh private placement. “After that we will be able to improve the capital adequacy ratio over 14 per cent and then we will go for friendly acquisitions,” Padmakumar said.

He also said that Federal Bank will go for acquisition of those banks, which have sufficient branch network in those regions where Federal Bank does not have much presence. Federal Bank’s total deposits till the last fiscal to March 31, 2002 stood at Rs 11,000 crore. According to him, the bank plans to end the current financial year with total deposit figure of over Rs 12,000 crore.