Banks wary of overseas listing

NEW DELHI, MARCH 5. Many public sector banks will not venture into the overseas capital market immediately despite liberalised ADR/GDR norms announced in the budget fearing that they may not get "fair value" for their shares prior to their financial restructuring and downsizing. Banks including Bank of Baroda, Oriental Bank of Commerce and Canara Bank have kept their decisions in abeyance as to when to tap the U.S. and European markets while maintaining that their "options were open".

Most PSBs are now on a restructuring drive to shed extra flab through the ongoing voluntary retirement scheme (VRS), reduction of non-performing assets ratio (NPA) and technology upgradation, which the banks hope will buoy up their share values.

"Our capital adequacy ratio is okay now. But we are open to the ADR option in future," the BOB Chairman, Mr. P. S. Shenoy, told PTI, adding that the bank's share-price should be Rs. 170 a share as against the market price of about Rs. 70 now.

He said the bank was concentrating on its core business, reposition itself as a 'technology bank' and unlock the shareholders' value. The bank would invest about Rs. 300 crores in its e-initiatives within the next 12-18 months.

The OBC Chairman, Mr. B. D. Narang, earlier said the bank would keep itself in readiness for overseas listing but would wait for share value to improve. The bank had switched to us generally accepted accounting principles (GAAP) this fiscal.

Another aspect that has been under active consideration for the front-ranking PSBs is the fiscal health after consolidation of accounts as directed by the Reserve Bank of India.

Mr. Shenoy said BOB aimed to reduce NPA below six per cent this fiscal as compared to 6.7 per cent last year.

Canara Bank and OBC, which have NPAs lower than the industry average of about 7 per cent, also aimed to bring it down further in the coming years.

The right-sizing of PSBs through the ongoing VRS scheme would eat into the profit to some extent but chairmen of healthy banks are confident to absorb it without much impact on margins especially after the Government allowed VRS expenditure to be amortised for five years.

The BOB Chairman said his bank would be on target by offering VRS to about 6,700 employees and was expected to make an ex-gratia payment of Rs. 500 crores and other payments amounting to Rs. 200 crores. "Once it is spread over five years, it would not be much of an impact," he said.

Apart from NPAs and VRS, the banks are also contemplating a major consolidation within the organisations that would be reflected in their financial results.

BOB is scouting for foreign partners for its subsidiaries in merchant banking, asset management company and housing finance arms to improve its performance through inducting better technological support from the partners.

Apart from public sector banks, overseas listing is also on the cards for some of the e-savvy private banks such as HDFC Bank and UTI Global Bank.

At present, only ICICI and ICICI Bank are listed in the New York Stock Exchange.

- PTI

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