United Bk asks govt to convert Rs 1,200cr to pref shares

United Bank of India has urged the central government to convert Rs 1,200 crore equity share capital into preference shares in its capital restructuring plan.

"We will be submitting two proposals to the government and RBI pertaining to our capital restructuring. One of them would be reduction of equity share capital by Rs 1,200 and simultaneously converting it into preference share capital," P K Gupta, CMD of UBI, said.

The other option is reduction of equity share capital by Rs 1,200 crore and converting Rs 905 crore of it into preference share capital and investing the remaining Rs 295 crore into innovative perpetual debt instruments (IPDI).

Currently, the equity base of the bank is Rs 1,532.43 crore, he added. "We prefer the first option. This is primarily to make our initial public offering attractive that will be launched once the capital restructuring is complete," Gupta said.

Meanwhile, the bank intends to raise Rs 300 crore of Tier II capital very shortly, Gupta said.

"To support our business growth and Basel II implementation, the board has approved raising of Rs 300 crore Tier II capital. We are planning to raise the capital shortly," Gupta said.

UBI is to roll out its pilot project of implementing core banking solution (CBS) in December 2006. "The pilot phase of implementing CBS would be done this December. By March 2007, 55 branches are to be CBS enabled, to be scaled up to 300 branches by March 2007 and 600 branches by March 2008," Gupta said.

The bank today reported 10.79 % growth in net profit to Rs 70.35 crore in the first quarter ended June 30, 2006. Operational profit declined due to lower trading profit and higher depreciation.

Total business of the bank grew 19.55% to Rs 46,340 crore for the quarter ended June 30, 2006, and the target is to end this year at around Rs 53,500 crore, Gupta said.