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State-owned United Bank of India (UBI) is looking to convert a part of 80,000 perpetual non-cumulative preference shares (PNCPS) of ₹1 lakh each into equity shares by March. This would lead to an increase in its common equity, which is considered as Tier-I capital, a senior official said on condition of anonymity.
However, under the Basel III norms, PNCPS are not reckoned as pure equity and hence cannot be considered as part of Tier-1 capital of a bank. Its Tier-I capital fell to 5.6 per cent (below the RBI-mandated 6 per cent), from 6.18 per cent in September. The bank thus faced restrictions on lending.
The board, in the first tranche, has proposed to convert 11 crore PNCPS into an unidentified number of equity shares at a price to be fixed according to a SEBI formula.
The bank’s capital adequacy ratio (according to Basel III norms) declined to 9.01 per cent in December as against 9.48 per cent in September. This was just above the RBI mandated 9 per cent after the Centre injected around ₹700 crore in the third quarter (October-December period).
The bank’s board, according to a filing with the stock exchanges, approved a move to “create, offer, issue and allot by conversion of up to 80,000 PNCPS of ₹1 lakh each into such number of equity shares of ₹10 each at a conversion price. This has been proposed to be done on preferential basis in one or more tranches,” UBI said in a release to the stock exchanges.
PNCPS are part of the current 88 per cent Government holding in UBI.
Burdened by an increase in non-performing assets and higher provisioning, UBI reported its second consecutive quarterly loss, of ₹1,238 crore, in the October-December period.
Fresh slippages were a little over ₹3,000 crore during the quarter, resulting in gross NPAs (to total advance) hitting 10.82 per cent of the total or ₹8,546 crore, thereby impairing its ability to lend.
Merger talks Meanwhile, UBI on Monday denied reports of any merger talks with Union Bank of India or any other private or public sector bank.
“There is no information with us of the bank getting merged with any other PSU/private bank, including the Union Bank…..The bank continues to focus on its resolve to reduce NPAs and turn around in the near future,” it said in a release.
However, shares of UBI touched a high of ₹27.70, and closed at ₹25.80, up 5.95 per cent at the BSE on Monday.
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