QIP – Page 2 – IFSCCodeof.in

Analysts suddenly gung ho on this PSU bank, see up to 50% upside, BFSI News, ET BFSI

August 11, 2021 root Banking & Finance

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NEW DELHI: Bank of Baroda (BoB) impressed Dalal Street with its June quarter operating performance. A double-digit growth in retail loans and an expansion net interest margin (NIM) in the challenging June quarter were noteworthy. Gross non-performing assets fell marginally, but the impact of the second wave of Covid on its retail and MSME books was visible on slippages and credit cost.

Analysts said the situation was still under control and the management commentary was strong.

They said a rebalancing of the portfolio in favour of retail and a gradual decline in the international book would support NIM for the PSU bank. This, along with a moderation in credit cost will improve the return on asset (RoA) trajectory for the bank, analysts said and suggested up to 50 per cent upside for the stock.

“BOB recently raised capital via QIP, leading to a reasonable CET 1 of 11.3 per cent. With the merger (Vijaya Bank and Dena Bank) and asset quality pain now largely over, we expect BoB’s return on equity (RoE) to gradually improve to 10-12 per cent over FY23-24 from a low of 1 per cent in FY21,” it said and suggested a price target of Rs 122.

At Monday’s close of Rs 81.15, that target suggested a 50 per cent upside.

Motilal Oswal Securities has hiked its earnings estimates by 47 per cent for FY22 and 22 per cent for FY23 post the bank’s Q1 numbers. Estimating an RoA of 0.7 per cent and an RoE of 10.3 per cent by FY23, it has upgraded the stock to ‘buy’, with a revised price target of Rs 100.

ICICIdirect also sees the stock at Rs 100. It listed four factors that would prove key to its performance. First is the shedding of the bank’s low yield exposure and its focus on retail segment. Secondly, a shift to the new tax regime, which is set to aid profitability. The third is the comfortable capital to risky asset ratio at 15.4 per cent, which may keep earnings dilution risk away. Lastly, the decent asset quality amid the tough situation would help.

The bank reported a net profit of Rs 1,209 crore compared with a loss of Rs 864 crore a year ago. Net interest income (NII) rose 16 per cent to Rs 7,892 crore. Net interest margin (NIM) came in at 3.04 per cent against 2.52 per cent YoY and 2.73 per cent QoQ.

Retail loans rose 12 per cent YoY, led by a 25 per cent growth in auto loans, 20 per cent growth in personal loans, and a 38 per cent growth in gold loans.

The loan book, however, declined 2 per cent due to a 10 per cent fall in corporate loans as the bank shed low-yielding loans.

The gross NPA ratio declined marginally to 8.86 per cent from 8.87 per cent in the March quarter and 9.39 per cent the year-ago period, as recovery and upgrades increased to Rs 4,435 crore from Rs 818 crore YoY. The bank management is targeting Rs 14,000 crore in recoveries in FY22 and has guided for 1.5-2 per cent credit cost and net slippages of less than 2 per cent.

“It was a relatively steady performance but uncertainty over subsequent Covid waves and relatively elevated stress pool still temper our enthusiasm on earnings stability. The bank’s recent capital raise was dilutive, which is a persistent challenge for PSBs. We are rolling overestimates to December FY22, revising our target to Rs 98 from Rs 95 earlier,” Edelweiss said.

Edelweiss said the demonstration of the merger value add and, indeed, getting through the current crisis without deep earnings erosion will be key to the stock performance.

The promised post-merger rationalisation benefits are not a foregone conclusion, given the complexity of the task at hand, it said and suggested that the valuation at 0.5 times FY22E P/BV lends some comfort.

JM Financial is building in a credit cost of 1.2 per cent and RoA of 0.7 per cent for FY23. It has a price target of Rs 95 on the stock.

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As markets soared, PSBs raised a record Rs 58,700 via debt, equity, BFSI News, ET BFSI

August 2, 2021 root Banking & Finance

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Make hay while the sun shines. As the stock market soared during the pandemic, public sector banks raised a record Rs 58,700 crore from markets in FY2020-21 through a mix of debt and equity to enhance the capital base.

Series of successful QIP reflect the confidence of both domestic and global investors in PSBs and their potential.

The fundraise

This included Rs 4,500 crore raised by Mumbai-based Bank of Baroda from qualified institutional placement (QIP). Punjab National Bank mobilised Rs 3,788 crore through share sale on a private placement basis during the financial year ended March 31, 2021.

At the same time, Bengaluru-based Canara Bank raised Rs 2,000 crore from QIP, as per data collated from regulatory filings.

In addition, 12 PSBs raised funds from Tier I and Tier II bonds taking the total fund mobilisation to Rs 58,697 crore, highest amount garnered in any financial year.

Government reforms

Various reforms undertaken by the government including recognition, resolution and recapitalisation resulted in progressive decline in non-performing assets (NPAs) and subsequent rise in profit.

NPAs of PSBs had declined to Rs 7,39,541 crore as on March 31, 2019, Rs 6,78,317 crore on March 31, 2020 and further to Rs 6,16,616 crore as on March 31, 2021 (provisional data). Provision Coverage Ratio (PCR) at the same time increased sequentially to a high of 84 per cent.

As a result, PSBs in aggregate recorded a profit of Rs 31,816 crore, highest in five years, despite 7.3 per cent contraction in economy in 2020-21 due to COVID-19 pandemic.

The primary reason for PSBs to post such a Rs 57,832-crore turnaround from a loss of Rs 26,015 crore in 2019-20 to a combined profit of Rs 31,816 crore was the end of their legacy bad loan problem.

At the same time, comprehensive steps were taken to control and to effect recovery in NPAs, which enabled PSBs to recover Rs 5,01,479 crore over the last six financial years.

Credit growth

Overall credit growth of Scheduled Commercial Banks (SCBs) has remained positive for 2020-21 despite a contraction in GDP (-7.3 per cent) due to the COVID-19 pandemic.

As per the RBI data, gross Loans and Advances of SCBs increased from Rs 109.19 lakh crore as of March 31, 2020, to Rs 113.99 lakh crore as of March 31, 2021.

Further, as per RBI data of loans to agriculture and allied activities, micro, small and medium enterprises, housing and vehicles have witnessed a year-on-year growth of 12.3 per cent, 8.5 per cent, 9.1 per cent and 9.5 per cent respectively during the year.

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LIC, SBI Life, Canara Bank pick up stakes in Indian Bank, BFSI News, ET BFSI

June 26, 2021 root Banking & Finance

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NEW DELHI: Life Insurance Corporation (LIC), SBI Life and Canara Bank were among the top investors picking up stakes in Indian Bank under a QIP, according to a regulatory filing.

The country’s largest and the only state-owned life insurer, LIC, picked up 17.80 per cent of the shares issued under the qualified institutional placement (QIP), which closed on Thursday.

It was followed by SBI Life Insurance (11.87 per cent), SBI Mutual Fund and its various schemes (11.87 per cent), Societe Generale and its various schemes (9.74 per cent) and Canara Bank subscribing to 5.93 per cent of the shares offered in the issue, according to the regulatory filing by Indian Bank.

Indian Bank raised a total of Rs 1,650 crore in its QIP of shares, which were issued at Rs 142.15 apiece.

The state-owned lender said it allotted 11,60,74,569 new equity shares to the eligible qualified institutional buyers (QIBs) in the issue that opened on June 21 and closed on June 24.

In March this year, its board’s committee on capital raising had given approval for raising equity capital aggregating up to Rs 4,000 crore through QIP in one or more tranches.

Indian Bank’s shares closed at Rs 148.35 apiece on the BSE, up 0.64 per cent from the previous close.

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Banks see revival from July, tank up capital to meet loan demand, BFSI News, ET BFSI

June 25, 2021 root Banking & Finance

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Banks are hoping for revival from the next month as Covid infections and lockdowns ease and have started raising capital to meet the likely loan demand jump.

State-owned Indian Bank has raised Rs 1,650 crore through the QIP launched earlier this week. In March this year, the committee of directors of capital raising of the bank had accorded approval for raising equity capital aggregating up to Rs 4,000 crore through QIP in one or more tranches.

State Bank of India has received its board’s approval to raise Rs 14,000 crore through the issuance of additional tier 1 capital.

Kolkata-based Uco bank has received a board approval for Rs 500 crore tier 2 issue, over and above an earlier approval for up to Rs 3,000 crore through share sales.

Bank of Maharashtra has received shareholders’ approval to raise up to Rs 5,000 crore equity capital through various modes, including rights issue and preference issue.

The shareholders approved the proposal at the bank’s annual general meeting (AGM) held on June 24, 2021, through audio/visual means.

Banks see revival from July, tank up capital to meet loan demand

Gradual recovery

The non-food year-on-year credit growth was recorded at 5.7% as on June 4, slower than 6.2% seen a year back, Reserve Bank of India data showed. This reflects risk aversion from both borrowers and lenders. However, bankers and brokerages are expecting an uptrend here on.

“We continue to believe that credit growth will bounce back in the near-term from the short-term ‘second wave’ disruption,” HDFC Securities said in a note earlier in the month. The credit demand is primarily expected from the retail segment as seen in earlier months while corporate demand is likely to be muted.

Corporate credit growth is likely to be subdued as companies are still deleveraging and may not go for capex soon.

“Corporate willingness for new investments remains low currently as the economy is still recovering from the devastating second wave. Investment scenario is tepid as gauged by new investment announcements, which saw 67% decline in FY21 as per CMIE,” SBI’s economic research said.

Banks are better placed this year to support credit growth with as many as 12 public banks reporting annual net profit in FY21 after five consecutive years of losses. “Apart from trading gains, the return to profitability was supported by lower credit provisions on their legacy non-performing assets, after the high provisions made during the last few years,” ratings company Icra said.

Experts see the revival to be gradual in the second quarter and expected to be much better from September, aided by good monsoon and festive season.

The demand for credit would likely come from the retail and micro, small and medium enterprises segments.

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Indian Bank opens Rs 4,000-cr QIP issue; sets floor price at Rs 142.15/share, BFSI News, ET BFSI

June 22, 2021 root Banking & Finance

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State-owned Indian Bank on Monday launched its qualified institutional placement (QIP) of shares to raise around Rs 4,000 crore, setting the floor price at Rs 142.15 per share. The committee of directors on capital raising in its meeting held on Monday approved and authorised the opening of the QIP on June 21, Indian Bank said in a regulatory filing.

The committee approved the floor price for the QIP at Rs 142.15 per equity share. Floor price is the minimum price set for an issue, below which an offer cannot be made.

“The bank may, in accordance with the special resolution of the shareholders, at its discretion offer a discount of up to 5 per cent on the floor price in the QIP,” it added.

Further, a meeting of the committee is scheduled to be held on June 24, 2021 to consider and approve the issue price, including a discount for the equity share to be allotted to eligible qualified institutional buyers (QIBs), pursuant to the QIP, it said.

In March this year, the committee of directors had accorded approval for raising equity capital aggregating up to Rs 4,000 crore through QIP in one or more tranches.

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To power FY22 advances growth, Bank of Maharashtra eyes ₹2,000 cr fund raise

June 17, 2021 root Banking & Finance

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Bank of Maharashtra (BoM) has embarked on an exercise to mop up ₹2,000 crore via qualified institutions placement (QIP) of equity shares in a bid to support its FY22 advances growth target of 16-18 per cent.

The Pune-headquartered public sector bank expects to tap the QIP route, comprising core issue size of ₹1,000 crore and a green shoe option of ₹1,000 crore, by July-end.

AS Rajeev, MD & CEO, observed that the Bank’s target is to increase the advances portfolio to at least ₹1.25 lakh-crore by March-end 2022 against ₹1,07,654-crore as at March-end 2021.

“The envisaged increase in advances of ₹20,000-25,000 crore will absorb around ₹1,500 crore of capital. We will raise another ₹1,000 crore either via Additional Tier-I or Tier-II bonds by March-end 2022,” he said in an interaction with BusinessLine.

The resources raised via QIP and bond routes is expected to take care of the advances growth for the next one to one-and-a-half years. “We posted ₹550 crore net profit in FY21. We are envisaging 25-30 per cent growth in net profit (in FY22). This will also further increase our capital. So, for another two years, we will not require any capital. This is the plan,” Rajeev said.

After the fund raising and plough back of profit, BoM’s capital to risk-weighted assets ratio is likely to go up to 15 per cent by March-end 2022 from 14.49 per cent as at March-end 2021.

Tweaking loan composition

Rajeev underscored that the retail, MSME and agriculture (RAM), and corporate (government guaranteed advances) advances could increase by about ₹15,000 crore and ₹10,000 crore, respectively, so that the retail to wholesale advances ratio in overall portfolio moves to 65:35 as at March-end 2022, against 67:33 as at March-end 2021.

Within emergency healthcare services, BoM’s pharma sector exposure could go up from about 2 per cent of total advances to 4-4.5 per cent. “Funding support is needed by the sector to manufacture Covid-19 related vaccines and medicines,” Rajeev said.

Higher recovery target

BoM is eyeing a higher recovery target of ₹3,000 crore in FY22 against ₹1,644 crore in FY21. “Our target is to bring down Net Non-Performing Assets (NPAs) below 2 per cent by March-end 2022 (from 2.48 per cent as at March-end 2021) and Gross NPAs below 6 per cent (from now 7.23 per cent),” Rajeev added.

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Bank of Maharashtra plans to raise up to Rs 2,000 crore through QIP, BFSI News, ET BFSI

June 14, 2021 root Banking & Finance

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MUMBAI: State-run Bank of Maharashtra is looking to raise up to Rs 2,000 crore through qualified institutional placement (QIP) route before July-end, its Managing Director and CEO A S Rajeev said. In April this year, the Pune-based lender had received board approval to raise Rs 5,000 crore by way of QIP/rights issue/ preferential issue or by issuing Basel III bonds.

“We are planning to raise around Rs 2,000 crore equity through QIP immediately. The process has already started and we will raise it before July-end,” Rajeev told in an interaction.

The base size of the issue is Rs 1,000 crore and it has a greenshoe option of another Rs 1,000 crore, he said.

Following this equity raise, the government’s holding in the bank will reduce to below 85 per cent from 94 per cent currently, and the capital adequacy ratio will improve to 17-18 per cent from around 14.49 per cent as of March 31, 2021, Rajeev said.

This fund will be deployed for expansion of the loan book, which the bank is looking to grow by 16-18 per cent to around Rs 1.25 lakh crore in this fiscal from Rs 1.08 lakh crore as of March 31, 2021, he said.

Of the total loan book of the bank at present, the share of corporate loans is 37 per cent and of retail, agriculture and MSME (RAM) segment is 63 per cent, he said adding, “We want the ratio of RAM to the corporate segment to be 65:35 during the current fiscal.”

The bank is envisaging a 20-25 per cent growth in the retail, agriculture and MSME (RAM) segment this year.

The lender’s corporate loan size is close to Rs 40,000 crore and it is targeting to grow it by another Rs 10,000 crore in this financial year. It has a sanction pipeline of Rs 25,000 crore in the corporate and MSME segments for the current fiscal, he said.

“We have churned our portfolio with improvement in the share of lending to better-rated corporates. This will minimise the delinquencies and attract lower capital requirement,” Rajeev added.

In the corporate segment, the bank will continue lending to better-rated corporates, including sunrise sectors such as infrastructure, pharmaceuticals and FMCG, he said.

Under the government’s Emergency Credit Line Guarantee Scheme (ECLGS), the bank’s total disbursement, so far, is around Rs 2,100 crore, and it plans to lend another Rs 500 crore this year.

Rajeev said the bank’s exposure to the healthcare sector is Rs 2,000-2,400 crore, which is 2 per cent of the total advances portfolio. In April and May, it had already disbursed over Rs 225 crore to the sector.

“We intend to double our portfolio under the healthcare sector and make it 4 per cent of our total advances portfolio during the current fiscal. We have also come out with two to three products in tune with the RBI policy,” he said.

Last month, the RBI had announced an on-tap term liquidity facility of Rs 50,000 crore under which banks can provide fresh lending support to a wide range of entities from the healthcare segment.

The government has also announced ECLGS 4.0, under which a 100 per cent guarantee cover to loans up to Rs 2 crore will be provided to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants.

Rajeev further said since the exit from the RBI’s prompt corrective action (PCA) framework in January 2019, the lender has taken several steps to strengthen its balance sheet, which has resulted in a significant improvement in all its financial parameters.

“We have been successful in registering profits quarter on quarter since March 2019. Our net profit rose 41.39 per cent to Rs 550 crore during FY21 from Rs 389 crore in FY20. Operating profit also rose 39 per cent to Rs 3,958 crore in FY21 from Rs 2,847 crore last year,” he said.

The bank’s CASA (Current Account and Savings Account) improved to 54 per cent as of March 31, 2021, which according to Rajeev is one of the best in the banking industry.

The bank has also managed to bring its gross non-performing assets to 7.23 per cent as of March 31, 2021, from 18.64 per cent in September 2018, when it was under PCA. Net NPAs stood at 2.48 per cent as of March 31, 2021.

At present, market capitalisation of the bank stands at Rs 17,500 crore against Rs 3,948 crore as of March 2019, he said.

In FY22, the bank is targeting to bring down gross NPA to below 6 per cent and net NPA to below 2 per cent. Net interest margins (NIM) will remain above 3 per cent in this fiscal, he said.

It has set a recovery and upgradation target of Rs 2,500-2,600 crore during the current year. The lender is also expecting Rs 500 crore recovery from written-off accounts in this fiscal, Rajeev said.

The lender is looking at opening 200 banking outlets with a hub and spoke model in this fiscal, he added.

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Bank of Maharashtra plans to raise Rs 2,000 crore via QIP, BFSI News, ET BFSI

June 13, 2021 root Banking & Finance

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MUMBAI: Bank of Maharashtra has decided to float a Rs 2,000-crore qualified institutional placement (QIP) of equity shares next month. The public sector lender has received approval from its shareholders for the capital raise last year.

Speaking to TOI, A S Rajeev, MD & CEO BoM, said that the bank had capital adequacy of 14.5%. Of which, 10.9% is the tier I and capital adequacy is good. “For growth purpose, we require capital as we are envisaging a credit growth of 16-18%. This means that advances will grow by around Rs 25,000 crore for which we require Rs 1,400-1,500-crore capital” he said.

The bank is looking at an issue of Rs 1,000 crore with a greenshoe option to retain an oversubscription of Rs 1,000 crore. “In addition to this we will be raising Rs 1,000 crore through additional tier I and tier II bonds,” said Rajeev. The bank’s stock, which was trading below Rs 11 a year ago, closed at Rs 27 on Friday.

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