Canara Bank hits mart with Rs 250-crore bonds

Our Banking Bureau

Mumbai, Aug 26: CANARA Bank has hit the debt market with a Rs 250 crore subordinated bond issue with a green-shoe option of Rs 200 crore. The tenure is for a period of 67 months and the coupon is 9.70 per cent, which is to be paid annually. The issue opened on August 24 and is slated to close on September 4.

Lead managers to the issue are Canara Bank’s merchant banking division, I-Sec, SBI Caps, Kotak Mahindra Capital Company, DSP Merrill Lynch and AK Capital Services.

The bonds have been rated ‘AA+’ indicating high safety by the Credit Rating Information Services of India Ltd (Crisil). The funds are being raised for shoring up the bank’s capital adequacy ratio.

The rating of Canara Bank reflects its strong market position, comfortable resource and liquidity profile, strong resources and relatively low level of non-performing assets (NPAs). The rating also factors in the high likelihood of support available to the bank by virtue of its government ownership.

However, the bank, has at present, lower net profits despite improved operating profits in view of the need for provisioning on account of liabilities of its subsidiary Canbank Financial Services Ltd (Canfina).

Canara Bank had a market share of 6.21 per cent of total deposits of scheduled commercial banks (SCBs) as of March 31, 2001.

Wholly-owned by the Centre, Canara Bank has grown from a regional bank to become one of the few national level players in the banking industry with a branch network of more than 2,400 branches spread all across the country.

Canara Bank had reported a 21 per cent rise in its net profit to Rs 285 crore for the year ended March 31, 2001 as compared to Rs 236 crore for the previous fiscal. The bank’s total business (deposits plus advances) for the year rose 21.5 per cent to Rs 86,901 crore (Rs 71,548 crore).

It recorded an operating profit of Rs 324 crore for the first quarter ended June 30, 2001 as compared to Rs 185 crore for the same period last fiscal.

The rise in operating profit is after taking into account Rs 45 crore towards pro-rata expenditure under the special voluntary retirement scheme (VRS) for the current year. After the VRS scheme, the bank’s employee strength has been reduced by around 8,000.

It has computerised 996 branches, which together cover 74.5 per cent of total business. The bank recently launched two new loan schemes ‘CanRent’ and ‘CanMortgage’ as part of its initiatives towards strengthening its retail operations.