Financial Daily from THE HINDU group of publications
Friday, Jun 28, 2002
Money & Banking
Markets - IPOs
Canara Bank plans IPO in Q3
Mr R. V. Shastri
BANGALORE, June 27
THE public sector Canara Bank has proposed to go ahead with its much-delayed Rs 110-crore public issue, towards the third quarter of this financial year.
Speaking to presspersons after the launch of the bank's technology banking initiative, Mr R.V. Shastri, Chairman, said however, that the pricing of the equity had not yet been finalised. But the issue would bring down the Government's stake in the bank by 27 per cent, he added. The issue would also allow the bank to return capital equivalent Rs 277 crore back to the Government.
The surrender of the equity would have to be approved by the Union Cabinet, since it would be a further dilution in stake. "We are awaiting the Government's response,'' he said.
The banks current equity base is Rs 577.86 crore, entirely held by the Government. The return of the equity would allow the banks' earning per share to remain high.
Asset spreads of the bank were under pressure, he admitted. This, he said, was on account of fall in yields of Government securities. But despite this fall in spreads, the bank is expected to show a quantum increase in profitability, he said. However, the profits this year would be driven by growth in credit assets and less by treasury operations, he added.
This increase in profits would be volume driven and substantially by retail loans, he added. The bank has targeted a total business volume in excess of Rs 1,00,000 crore for the current financial year, well above Rs 97,000 crore registered during the last year. However, for such loans, the bank would carry out sufficient due diligence in order to ensure the quality of the assets remain standard.
Referring to existing portfolio of non-performing assets, he said, some of them would be transferred to the Asset Reconstruction Company at a discount. This would improve the banks' liquidity position. Asked whether, the transfer will also include loans extended to the Dabhol Power Company (DPC) promoted by Enron, Mr Shastri said, "We will wait for the initiative of the lead arrangers and decide accordingly.'' Canbank's exposure in the power company is about Rs 300 crore directly.
As part of the technology initiative, he said, the bank would be launching its mobile banking services. This service would allow account holders to access their accounts from the WAP (Wireless Access Protocol) enabled cellular phones from any part of the country. This service would be available from September this year.
By December this year, the bank intended to launch the Internet banking across all the major branches in the country. This service would allow customers to draw cheques, obtain cheque books and demand drafts from all the major branches in the country.
The bank, meanwhile, has initiated the anywhere banking covering 180-branches in five cities of the country. This facility covered both inter-city and intra-city transactions. By the year-end, he said, the bank hoped to bring in at least 370 branches within this anywhere banking network.
This will make Canbank to provide this kind of facility to account holders. Currently, such facilities are available only with the new private sector banks whose branch network, however, is smaller in size compared to the public sector banks.
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