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PSBs gain approval to raise capital but investors unsure, says report

Banks are looking to raise money up to 90 per cent of market cap, according to Morgan Stanley report

Press Trust of India  |  New Delhi 

Morgan Stanely
Morgan Stanely

A number of state-owned have taken approval to raise significant amount of capital, but investor appetite for fresh issuance is likely to be lukewarm, says a report.

According to a research report, eight public sector have taken board approvals to raise fresh capital, while another five have informed exchanges that their boards will consider capital raising in upcoming meetings.

State of India, of India, Oriental of Commerce, Vijaya Bank, Bank of Maharashtra, Dena Bank, and have taken approval from the board to raise capital while those that would seek approval are Bank of Baroda, United Bank of India, Bank, and

The report, however, noted that the investor appetite for fresh issuance is likely to be lukewarm.

It noted that while large should be able to raise capital given relatively better fundamentals, smaller state owned banks may struggle.

"With all banks looking to raise capital, demand from investors may be muted - unless banks make this offering to government / government backed entities," the report said.

Moreover, the amounts they are looking to raise is high at as much as 90 per cent of market cap (compared to 6 per cent at SBI).

The report said as government capitalisation continues to be piecemeal and below requirements, state-owned enterprise banks will likely struggle to make proper provisions on bad loans, keeping the NPL (Non Performing Loans) problems alive.

First Published: Wed, May 24 2017. 16:51 IST