The Hindu Business Line : Union Bank targets 11.5% CAR post-public issue

UNION Bank of India hopes to achieve a capital adequacy ratio of 11.5 per cent after it completes its follow-on public issue, slated for later this year.

The bank, which plans to issue 4.5 crore shares to the public, has already sought the Government's permission for the offer. The latter, to be made through the book-building route, will see the Government's holding in the bank reduce to 55.45 per cent from 60.85 per cent.

UBI, said Mr K. Cherian Varghese, Chairman and Managing Director, proposes to shore up its capital adequacy in the light of its strong credit growth and to meet Basel II requirements. At the end of September, its capital adequacy ratio stood at 11.05 per cent.

For the bank, the reduction of the principal shareholder's stake is a significant matter, especially so because the Government's holding cannot fall below 51 per cent. This, the UBI chief told newspersons, presented a unique situation for all public sector banks, many of which are nearing this 51-per cent mark. Various options, including preference issues, are said to have been weighed by the banking fraternity; however, a clear picture has not emerged.

As for the follow-on offer, the premium has not been fixed. The bank's shares are currently quoting at about Rs 115. On Tuesday, it closed on the NSE at Rs 115.75.

On another front, UBI plans to step up lending to the infrastructure sectorTie up with Sharekhan: UBI has entered into an agreement with Sharekhan, the stock broking company, to provide online trading facilities to high networth customers.

The tie-up, Mr Varghese said, would help UBI's depositors and other clients to establish connectivity with Sharekhan's services. There will be fee-sharing arrangement. . For UBI, the tie-up entails no additional investment, it is pointed out.

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