Singapore: State Bank of India (SBI), the country’s biggest lender has said that it might need up to $4 billion in capital in the next financial year, when it could still see earnings growth of at least 25%.
Banks across Asia are looking to shore up their balance sheets as they prepare for a tougher business environment amid a global economic downturn.
“We may need more capital,” O.P. Bhatt, SBI’s chairman said on the sidelines of a conference in Singapore organised by the Confederation of Indian Industry (CII).
“It would not be less than $2-4 billion,” he said.
The capital would be for the financial year starting April 2009.
Bhatt said that the bank looks at its capital requirements periodically and will look at the needs after the current financial year ends in March.
He said that the capital may be raised to boost its Tier-1 capital adequacy ratio, but whether it would be done through a rights issue or other means has not been finalised.
Bhatt said that the bank may also sell around $100 million worth of retail bonds to boost Tier-2 capital, which would make it the first bank in the South Asian nation to target retail investors for debt.
Bhatt declined to predict quarterly results, but added the momentum for the country’s banking industry for the quarter that ended in December was robust.
Analysts polled by Reuters expect SBI to report a 37% rise in profit in its third quarter that ended in December, boosted by strong loan growth and earnings from trading in bonds that saw prices jump as interest rates fell.
He saw at least 25% earnings growth for SBI in the next financial year.
He warned that non-performing loans in India’s banking industry will rise from a low of 1% as the economy slows, but added bad debt will not rise sharply.
“I don’t think it will treble,” he said.
Analysts have said that rising bad debts, or non-performing loans (NPLs), will be the risk for Indian banks in coming quarters as a slowing Indian economy hurts jobs and incomes.