SBI, PNB to Union Bank - share sale by top 5 lenders may happen this fiscal

As many as five large banks, including SBI, PNB, BoB and Union Bank, are likely to sell shares to institutional investors in the second half of this fiscal as they look to shore up their capital base amid the coronavirus pandemic impacting the economy.

Qualified Institutional Placement (QIP) would be the most preferred way and public sector banks are likely to take a call on taking this route after finalisation of their second quarter results, merchant banking sources said.

According to the sources, banks would get a better picture about their Non-Performing Assets (NPAs), one-time loan restructuring and consequent ratings latest by the end of October.

Subsequently, banks can start the process of deciding the time, quantum, appointment of merchant bankers and other formalities, the sources said.

Four to five large banks like State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB) and Union Bank of India would look at raising capital towards the end of third quarter or during the fourth quarter of this fiscal, they added.

Further, the sources said these banks have to plan capital raising in such a manner that there is no crowd out of liquidity and enough space is available to both domestic and global investors to participate in various QIPs.

PNB has already expressed its intent to hit capital markets in the fourth quarter this fiscal to raise funds to help meet growth needs and regulatory requirements.

"We will be planning (capital raising) somewhere around the end of third quarter or beginning of fourth quarter. By this time, we would have declared two quarterly balance sheet of the amalgamated entities,"

PNB Managing Director S S Mallikarjuna Rao told PTI in June.

It is to be noted that private sector banks, including ICICI Bank, Axis Bank and Kotak Mahindra Bank, have already mobilised capital thr0ugh QIPs in the last three months.

In a precursor to capital raising exercise, most of the public sector bankshave already got shareholders' approval for raising capital through a mix of debt and equity route in the current fiscal.

For example, shareholders of SBI have given approval for raising Rs 20,000 crore through public issue or private placement of shares while PNB has received shareholders' nod for mopping up Rs 7,000 crore.

BoB and Union Bank of India too have approvals from their respective shareholders for raising Rs 9,000 crore and Rs 6,800 crore, respectively, by way of common equity capital through various modes, including QIP.

During the current fiscal, banks might be required to raise capital based on the assumptions of growth in Risk Weighted Assets (RWA) and ploughing back of profits.

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As far as raising capital through Tier I and Tier II bonds are concerned, SBI recently raised Rs 8,931 crore by issuing Basel III-compliant bonds to investors.

PNB garnered Rs 994 crore by issuing Basel III-compliant bonds on private placement basis while BoB raised Rs 981 crore by issuing additional tier-1 bonds.