The Hindu Business Line : City Union Bank to go for second round of funding

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Chennai March 5 City Union Bank, which recently got Rs 45 crore by giving a 9.99 per cent stake to L&T, may go in for another round of funding — about Rs 400 crore — in the second half of next year, the bank's Executive Director, Mr N. Kamakodi, has told Business Line.

Noting that the bank was comfortably placed as regards capital adequacy, Mr Kamakodi said that the funding would be to meet the long term targets the bank has set for itself, rather than to meeting any regulatory requirement.

The bank aims to reach a total business of Rs 25,000 crore by 2010-11 (Rs 7,500 crore now), comprising Rs 15,000 crore of deposits and Rs 10,000 crore of advances. It wants its net worth to reach Rs 1,000 crore by that year (Rs 320 crore, now) and see its market capitalisation go up to Rs 2,500 crore (about Rs 350 crore).

Towards this objective, the bank would need to raise about Rs 400 crore next year, Mr Kamakodi said, adding that half the amount would probably be raised through private placements.

City Union Bank's capital adequacy ratio stood at 12.69 per cent as of December. About two-thirds of its Rs 3,000-crore advances portfolio consists of loans under Rs 3 crore, which come under the head `retail loans'. Because the capital charge on retails loans is lower under Basel-II, City Union Bank's capital adequacy ratio will increase by about 1.5 percentage points when Basel-II kicks in.

Mr Kamakodi said that the bank expected to grow by about 30 per cent annually. Growth would come from increasing deposits and credits from existing customers, branch expansion and wresting accounts from the competition.

He said that in March, the bank would add 23 new branches to its network of 158 branches.

Also, City Union Bank is bringing in a slew of products, which it hopes will help it seize customers from the competition. Shortly, the bank will launch its debit card, mobile banking and full-fledged, transaction-enabled Internet banking service. When these three services are brought in, City Union Bank will be on par with the most technologically advanced bank in the country, Mr Kamakodi said.

It will also offer a service to its NRI clients, under which those living abroad will be able to wire in money into Indian bank accounts.

"Today, over one lakh of children of our customers are living in the Gulf, Singapore and the US. Because I am not offering this service today, they are going to other banks," he noted.