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| LVB to float housing finance subsidiary |
| BS Reporter / Mumbai Aug 24, 2010, 00:05 IST |
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Karur-headquartered Lakshmi Vilas Bank (LVB) on Monday said it planned to launch a housing finance subsidiary (HFC) to grow its retail loan book.
The HFC will start with an initial paid-up capital of Rs 70 crore and will be based out of New Delhi, although its registered office will be Bangalore.
“We are going to set up a housing finance subsidiary, after regulatory approvals, since this segment has significant potential,” LVB Chairman S Narayan told reporters in Mumbai on Monday.
LVB had a “very limited” presence in home lending with a loan book of Rs 200 crore, but was carving out a separate company as the prospects were very good, Managing Director and CEO P R Somasundaram said in Mumbai on Monday.
 The bank also plans an equity sale up to 40 per cent of its present issued capital by the end of the year. The lender will issue fresh shares of face value Rs 39 crore with each share having a face value of Rs 10. The lender’s shares were quoted at Rs 130.4 on the Bombay Stock Exchange at close of trading on Wednesday.
The lender has made a slew of hires in the past few months to transform itself from a South Indian-bank to a national player, including Somasundaram, who previously headed Standard Chartered Capital Markets.
Other hires include Executive Directors Rajat Baldhi and V Prakash, who are from Citi and ICICI Bank, respectively.
The lender, which is predominantly present in southern India, plans to expand its footprint in other regions. According to Somasundaram, 21 of the 43 branches the lender plans to open in the current financial year will be northern India.
The remaining 22 branches will be in the four southern states.
LVB had a provision coverage ratio of 57 per cent, including technical write-offs, as of June 30, 2010. According to Reserve Bank of India directives, all lenders have to achieve a provision coverage ratio of 70 per cent by September 30.
“We are in discussions with RBI and believe that a lot of banks will not the reach the required provision coverage ratio by September-end,” Somasundaram said. He added his bank would not be able reach the required provision coverage ratio by the stipulated date.
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