LIC to pick 5% stake in Punjab & Sind Bank

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PK Anand, executive director at Punjab & Sind Bank tells CNBC-TV18 says that the bank has got the go ahead for fund infusion through 5% stake sale to LIC. Post equity dilution, the capital adequacy ratio (CAR) of the bank will be 12.72% for the full year.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: There is issuance that is lined up and that will mean fund infusion in your company what will it mean in terms of capital adequacy once the fund infusion has been done?

A: We had approached LIC for picking up a 5% stake and we have got the approval from LIC, we are now waiting for RBI's recommendation on the same. At the moment our capital adequacy is 7.99% and tier-I was 7.95% as on December 31. With the infusion from LIC, the capital adequacy ratio should be 12.72% end of this fiscal that is 31 March, out of which 8.19% would be tier-I and 4.54% should be tier II.

Q: This is pre-LIC stake?

A: No, this is post. Had LIC not taken the stake, we would have closed the year at around 8% and 4.54% would be tier II. Now we close the year at 8.19% and tier II would be 4.54%.

Q: Your total equity dilution is 5%?

A: Total equity dilution would be slightly less than 5% because LIC is holding a few shares in our company. If 0.19% is the holding that they already have, in effect it would be about 4.81%.

Q: Any reason why LIC is raising the stake? The government couldn't find the money and that's why it has been passed onto LIC to raise the stake?

A: I would put it another way, they see value in the stock.

Q: But there was an urgent need to improve the capital adequacy as well?

A: No, we had already made the application to the Ministry of Finance sometimes back, at the beginning of the year itself. Business is also zooming large, so we require more capital and the application is pending. It is under active consultation. Once that came along we can offer 5% to LIC.

Q: To stay on at the 8% plus mark in FY13 as well it's possible you will need more doses of capital, so do you think LIC stands ready?

A: We would always propose them to increase that to 10% but at the moment we will be closing at 8.19%. What happens is that the net profits for the nine months period that have been made with the banks, they are still not being ploughed in with the capital. So that will also be some relief to the bank and the capital adequacy ratio.

Q: What are you expecting to end the year in terms of advances and deposit growth and more importantly margins?

A: During nine months, year-on-year, our growth was not very great, total business growth was around 12.52% till December. Now after the CRR cut, there is some acitivity and business is getting stronger and we are sure that we will improve on that. By the time we end the year, growth should be around 15-16%.

Q: And what would your margins be?

A: Margins were under pressure. We have NIM of around 2.38% and we expect that to increase to 2.4-2.45% by the end of this financial year.

Q: Would you be able to bring down your NPLs?

A: Yes, we are working on that and some good recoveries are coming in. Till first nine months, there has been good reduction also. Although NPLs slightly climbed up but still are under control. The gross NPLs are at 1.28% and the net NPLs are at 0.88%.

Q: Would you be able to bring it down from 1.28% or stabilize there or would it inch up?

A: It would be stabilizing around those levels.