Dena Bank plans to dilute govt stake to 52%

Dena Bank plans to dilute govt stake to 52%

State-run lender Dena Bank has decided to seek its board’s approval to dilute government stake to 52 per cent, the lender has informed the exchanges. The government at present holds 65 per cent equity in the bank.

“Aim is to raise equity capital of the bank by diluting government holding up to 52 per cent, on obtaining necessary approval from the government,” the bank said, adding that the board meeting would take place on Thursday.

The government has allowed public sector banks to bring down its stake up to 52 per cent to meet capital requirements. Public sector banks are in need of capital provisioning towards bad loans, which have increased sharply in the past three years amid a slowing economy.

The law mandates a minimum government holding of 51 per cent in the public sector banks.

The government has decided to infuse Rs 25,000 crore this financial year and in 2016-17 into these banks. Some banks have allotted equity shares to the government in lieu of capital infusion.

Rs 70,000 cr for banks

The government plans to infuse Rs 70,000 crore equity into the public sector banks over four years to shore up their capital base for meeting Basel norms. Besides, Dena Bank also plans to raise Rs 2,500 crore from various bonds. The bank will seek nod to raise Additional Tier-1 (AT1) capital up to Rs 1,500 crore in one or more tranches, in one or more instruments.

In addition, the proposal to raise Tier-2 capital up to an amount of Rs 1,000 crore more tranches will also be considered by the board.

The Mumbai-based lender, which has a business mix of Rs 1.6 lakh crore as on September 30, has a capital adequacy ratio of 11.22 per cent, under Basel-III norms, as compared to regulatory requirement of 9 per cent, with tier-I capital at 8.19 per cent.

The lender posted a net profit of Rs 53 crore during the first half of the financial year as compared to Rs 133 crore during the same period the previous year. Its gross non-performing assets were at 6.84 per cent of its total advances.

Dena Bank shares closed at Rs 45.45 apiece on the BSE on Tuesday, up 7.83 per cent from its previous close.

Source :BankingUpdates