Canara Bank gets board approval to sell stakes in AMC, housing finance units
Canara Bank will use proceeds from stake sales in mutual fund and housing finance units to augment resources and improve capital base
Mumbai: Canara Bank has got board approval to sell stakes in its asset management and housing finance units, either fully or partially, to augment resources and improve the capital base of the bank. The Bengaluru-based lender has hired investment bankers for the stake sales, it said in a stock exchange filing on Tuesday.
The board has also approved stake divestment in Canbank Computer Services Ltd, in which Canara Bank is the majority shareholder. The bank holds 51% in joint venture Canara Robeco Asset Management Co. Ltd, and 30% in listed entity Can Fin Homes Ltd. On 24 October, Mint reported that Canara Bank planned to hire investment bankers to help it sell stakes in some assets that are unrelated to its main lending business. The idea behind the sale of these non-core assets is to unlock the value of strategic investments.
The bank did not specify other details such as timing or how much it intends to sell.
Analysts said such steps by banks are positive because the committed capital by the government is yet to come and this would help banks prepare for business growth.
With capital adequacy ratio at 12.45% at the end of September, Canara Bank’s capital position is well above the regulatory requirement.
Banks, especially government-owned ones, need capital to not only meet regulatory requirements under Basel-III norms, which will be fully implemented as on 31 March 2019, but also for business purposes.
Additionally, banks also need funds for cleaning up balance sheets, which would force them to set aside money to cover bad loans. Last month, the finance ministry announced a Rs2.11 trillion bank recapitalization plan for state-owned lenders over two years. Of the total commitment, Rs1.35 trillion will come from the sale of so-called recapitalization bonds. The remaining Rs76,000 crore will be through budgetary allocation and fund raising from the markets
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