Date:01/11/2008 URL: http://www.thehindu.com/2008/11/01/stories/2008110155651600.htm

Business

UCO Bank to rejig capital

Has highest equity capital among PSBs
Equity reduction will improve EPS

NEW DELHI: The Central Government on Friday announced capital restructuring of Kolkata-based UCO Bank by converting Rs. 250-crore equity into preference shares that will enable the bank to raise funds from the market.

“The reduction in the pure equity capital will improve the EPS and other financial so that the bank will have more attractive capital structure,” Finance Minister P. Chidambaram told reporters while briefing on Cabinet decisions taken on Thursday.

If and when it approached the capital market it would have attractive capital structure and it could raise Tier-I capital, he said.

This conversion of equity into perpetual non-cumulative preference shares was in accordance with the RBI circular of October 29, 2007, he said.

UCO Bank has equity capital of Rs. 799.36 crore, the highest among all listed public sector banks.

Mr. Chidambaram said that this high equity base suppressed the earnings per share. Besides, it was difficult to service high portion of equity.

Asked about interest that would be paid on the preference shares, Mr. Chidambaram said, the coupon rate would be benchmarked to the repo rate plus 100 basis points.

This would be re-adjusted annually based on the prevailing repo rate on the relevant date. — PTI