Mumbai: State-run lender Dena Bank has sought Rs 1,200 crore in capital from Government in FY15 on the basis of its targeted business growth. “We are looking at a business growth of 18-20 per cent. We have written to the Government seeking Rs 1,200 crore on the core capital front during the fiscal,” chairman and managing director Ashwani Kumar said. He added that the Government holds 58 per cent stake in the bank which limits the bank's options for raising capital.
In such cases, a bank generally issues preferential shares to the promoter, which raises the Government's shareholding and this is followed by an institutional placement of shares.
The Mumbai-headquartered bank's core tier-I capital adequacy ratio was 7.43 per cent on March 31, 2014 with the total capital adequacy ratio at 11.14 per cent. Banks prefer to keep the core tier-I ratio above 8 per cent. Apart from the capital burning in routine lending business, banks have a higher demand for capital as they migrate to the capital-intensive Basel-III framework. The city-headquartered bank posted a 49.1 per cent surge in its March quarter net at Rs 187.28 crore, helped by a strong pace of bad asset sales to asset reconstruction companies (ARCs).
It sold bad assets worth Rs 543.92 crore during the quarter, through which its income received a benefit of Rs 260.49 crore, which included Rs 31 crore in cash while the rest was by the way of security receipts. The asset sale helped it reduce the gross non performing assets by Rs 251.92 crore, he added.
Courtesy the asset sale, the non interest income grew by 16 per cent during the March quarter at Rs 272.41 crore, while the core net interest income was up 9.31 per cent to Rs 614.29 crore.
The bank's gross non performing assets ratio slipped to 3.33 per cent as of Match 31, 2014, up from the 2.19 per cent in the year-ago period, on the back of a fresh slippage of Rs 1,026 crore. It also restructured advances of Rs 410 crore during the quarter.
Kumar said the asset quality stress has reached its peak and hoped that it will not deteriorate further from. He said that the bank has a restructuring pipeline of Rs 300 crore.
The bank's net interest margin narrowed to 2.32 per cent during the March quarter, down from the 2.66 per cent observed in the same period year ago.
Kumar said the bank will work towards upping its share of the low cost Current and Savings Account deposits, in order to increase the margin during FY14-15, and announced that it is targeting to take it up to 2.75 per cent.