UCO Bank may exercise the option of raising Rs 500-600 crore worth capital through follow-on public offer by the third quarter of 2009-10, according to its Chairman and Managing Director, Mr S. K. Goel.

“We have a headroom to raise Rs 100 crore base equity and at a premium of Rs 40-50 we can raise close to Rs 500-600 crore this year,” Mr Goel told newspersons on the sidelines of a banking conclave organised by the Federation of Indian Chambers of Commerce and Industry here on Monday.

The Government holding in the bank might come down to 52 per cent post the issue from 63.59 per cent as on March 2009, he said. The bank had planned to come out with an FPO early last year but had to put it on hold due to volatility in stock markets.

As part of capital restructuring, in March the bank received Rs 450 crore, out of Rs 1,200 crore, from the Government as Tier I capital. The bank is expected to get the remaining Rs 750 crore by September through preferential allotment of shares, he said.

As on March 31, the capital adequacy ratio of the bank was at 11.95 per cent .

UCO Bank, Mr Goel said, would consider a 50-100 basis points reduction in interest rates on deposits across various maturities in the first week of July. The cut was necessary on account of the falling lending rates exerting pressure on the net interest margin (NIM). The bank had earlier cut its prime lending rate by 50 basis points at 12 per cent effective from June 27.

Anticipating 15-20 per cent rise in its net profit for the April-June (2009) quarter on a year-on-year basis, he said, “Our profit for the quarter will be driven by treasury income, non-interest income and recovery of bad debts.” The treasury income during the quarter too was likely to be higher at Rs 105 crore (Rs 65 crore in the corresponding period last year).

The bank expects a 17-18 per cent growth in credit and deposits during the first quarter on a year-on-year basis.

“We expect our credit and deposits to grow by 25 per cent in 2009-10,” he said, hoping the NIM would improve to 2.25 per cent in 2009-10 from 1.98 per cent in 2008-09, reports The Hindu Business Line.