Dena may raise Rs 350 cr in FY09

Dena Bank is likely to raise Rs 300-350 crore capital in the next financial year to maintain a 24 per cent credit growth, according to P L Gairola, the chairman and managing director of the bank.

“However the cost of raising capital is important,” he said.

Dena Bank’s capital adequacy ratio (CAR) would be a little over 11 per cent at the end of March, including the tier-I capital adequacy ratio of 7 per cent, he said.

“You need to have at least 6 per cent tier-I capital adequacy ratio,” Gairola said, hinting at the need for equity capital.

The bank is constrained from raising equity capital as the government stake in the bank is at the minimum threshold of around 51 per cent.

Gairola also hopes that the bank will be able to sustain a net profit growth of 25-30 per cent in the next three to five years.

The bank had posted an extraordinary 176 per cent year-on-year net profit growth in 2006-07 due to a low base.

FOCUS FY09
Dena Bank would continue to focus on retail lending in the next financial year beginning April because of “good yield and risk disbursal,” Gairola said. The bank might also reduce deposit rates in April if liquidity improves, he said.

“We hope to regain 3 per cent net interest margin next year (2008-09),” Gairola said. The bank’s net interest margin is expected at 2.8-2.9 per cent by the March-end.The bank expects to maintain a fee income growth of 22-23 per cent in 2008-09.