BoB might sell assets, tap foreign bond market

Bank of Baroda (BoB) has drawn up a plan to generate capital internally that includes rationalising guarantees and tapping the overseas bond market.

The bank suffered a loss of Rs 3, 342 crore in the December quarter after setting providing for bad loans. Its capital adequacy was 12.18 per cent with 9.57 per cent Tier-I capital in December.

"The worst is over. What had to be done is done (provisioning). We have put issues behind, and the bank is working to move forward," said P S Jayakumar, BoB's managing director and chief executive.

The bank's share closed 22 per cent higher at Rs 139.55 on the BSE on Monday.

Senior BoB officials involved in the business plan said the bank is looking at liquidating some financial assets, whose value is in excess of Rs 4,000 crore.

These would exclude investments in an insurance company, brokerage, asset management company and Nainital Bank. Guarantees for customers are also being reviewed. "Capital gets blocked due to guarantees. Rationalising them will release some of it," a bank executive said. "We are also looking at repatriating funds from overseas operations," he added. These include bond investments and syndicated loans.

BoB's international loan book was Rs 1,25,085 crore at the end of December, of which 46.13 per cent is buyers' credit and 23 per cent is exposure to Indian

companies. Another step is improving the client profile. The bank lends mostly to customers with a BBB+ credit rating. It has begun to pick-up assets with A, AA and AAA rating.

"All these steps have the potential to add to 50 basis points (half a percentage point) to capital adequacy," the bank executive added.

The bank will raise money through additional Tier I bonds from the overseas market. "We already have board approval for such offerings. Compared to raising equity, tapping debt is relatively better," he said.

Another bank executive said it could look at securitising a part of its infrastructure loan book. BoB's exposure to road projects is about Rs 10,000 crore.