Corporation Bank to raise Rs 1000 crore via bond issues

Public sector lender, Corporation Bank, is planning to raise Rs 1,000 crore capital through bond issuances in the current financial year.

“We recently raised Rs 1,000 crore upper tier II capital and we may raise another Rs 1,000 crore this year through tier 1 perpetual bonds or upper tier II capital in FY10” said J M Garg, Chairman and Managing Director, Corporation Bank, on the sidelines of a Ficci Banking Conclave.

The bank had a headroom of raising about Rs 6,000 crore in the next two years, which was sufficient to meet the bank's growth requirement without seeking government permission for rights issue, he added. The bank’s capital adequacy ratio (CAR) was at 13.66 per cent as on March 31, 2009.

Corporation Bank has also decided to reduce interest rates on deposits by 25-50 basis points across various maturities effective July 1, 2009. “We are operating in a softer interest rate regime but the adjustments to be made by banks will come with a lag effect,” he said. Further rate cuts in the short term were expected, he added.

The bank expects about a 20 per cent growth in credit, and 22 per cent growth in deposits in the present financial year.

"In the first quarter the credit growth has not been as expected.On a year-on-year basis credit growth would be 20 per cent, against 30 per cent last year. Deposits continue to show robust growth, with about 25 per cent growth," said Garg. However, the net interest margin (NIM) will continue to be under pressure, Garg indicated.

“NIM has been coming down, because of the falling interest rates. NIM should stabilise in the second quarter,and improve in the third quarter,” said Garg. Last financial year, the bank’s NIM was 2.43 per cent, and it expects it to be around 2.50 per cent this financial year.

The bank expects a 20-25 per cent growth in net profit, mainly on account of about 40 per cent rise in non-interest income, against 30 per cent last financial year.