Punjab & Sind Bank aims at 3% interest margin

Punjab & Sind Bank, which is going for initial public offer (IPO) in the first half of next month, has said that it is aiming at a net interest margin (NIM) of three per cent this financial year.

"There will be improvement in the NIM. We are aiming at three per cent for the whole year (2010-11)," Punjab & Sind Bank executive director P K Anand said.

NIM is the difference between the interest earned by a bank and what it gives to depositors, and is an indicator of the levels of operating margins.

For the first half of this financial year, ending September 2010, the bank's NIM stood at 2.79 per cent against 2.32 per cent in the year-ago period. PSB will have to earn more than three per cent in the remaining fiscal to meet its objective.

Asked about interest rates revision, Anand said, base rate was revised upward to 8.45 per cent recently and the bank would review it again next month.

The bank is gearing up for IPO in the first half of December. The Securities and Exchange Board of India has given clearance to the bank's draft prospectus.

PSB proposes to issue up to Rs 4 crore fresh equity shares of Rs 10 each for cash at price to be discovered through a 100 per cent book building process.

This would dilute the government's holding by 17.9 per cent and post-offer, bringing it down to about 82 per cent.

The government owns 100 per cent stake in the bank and is the only unlisted entity among 19 nationalised banks.

Anand said the bank has not taken any decision on having an anchor investor for the IPO and added that the board would decide shortly on the issue. The board would also decide whether any discount can be offered to retail investors.

Anand said IPO proceeds would be utilised for business expansion and the funds raised would take care of credit growth for next 2-3 years. It would also enhance the capital adequacy ratio of the bank from 13.1 per cent to over 14 per cent.

The book value of the bank was Rs 119.5 at the end of September 2010.

For the first half, the bank posted an 11 per cent jump in net profit to Rs 261 crore, from Rs 235 crore in the same period previous year.

Its total business rose 33 per cent to Rs 88,8841 crore, against Rs 66,614 crore during six months to September 2009.