State-run Canara Bank Ltd plans to hire investment bankers to help it sell stakes in some assets that are unrelated to its main lending business.
The idea behind the sale of its so-called non-core assets is to unlock the value of its strategic investments, according to a tender notice on the bank’s website.
Canara Bank has invited bids and plans to empanel a minimum of three bankers who will procure the maximum valuation for its stake in various non-core assets as well as scout potential buyers.
The bank has eight domestic subsidiaries, including Canbank Financial Services Ltd, Canbank Factors Ltd, Canara Robeco Asset Management Co. Ltd, and Canara HSBC Oriental Bank of Commerce Life Insurance Ltd.
It has a 30% stake in listed entity Can Fin Homes Ltd and sponsors two regional rural banks.
The bank did not specify the details of the divestment process.
With this, Canara Bank joins other lender such as State Bank of India and IDBI Bank Ltd that have plans to sell non-core assets in a bid to strengthen their capital base.
Banks, especially government-owned ones, are in need of capital to not only meet regulatory and business requirements, but also for cleaning up balance sheets, which would force them to set aside money to cover bad loans, according to analysts.
In the case of Canara Bank, the capital position is well above the regulatory requirement. At the end of 30 June, the bank’s capital adequacy ratio stood at 12.61%.
Indian banks need additional capital of $65 billion to meet Basel-III capital norms, which will be fully implemented from the end of March 2019, Fitch Ratings said in a note on 12 September.
This is much higher than the $3 billion that the government has budgeted for 21 state-owned banks over the current and the next fiscal years.
According to the rating firm, state-run banks account for 95% of the estimated capital shortage.
Source: Mint