SBI to offer 15-year retail bonds at 9.95%

MUMBAI: State Bank of India will sell bonds to retail investors offering returns of 9.75% and 9.95% on 10- and 15-year bonds, respectively.

In a letter to the Bombay Stock Exchange, the bank said its central board has approved raising funds through the issue of subordinated debt (lower tier II bonds). It has approved selling bonds worth Rs 1,000 crore, with an option to retain oversubscription of up to Rs 1,000 crore. In case of retail demand, SBI can retain the oversubscription beyond Rs 2,000 crore up to Rs 10,000 crore.

This time around the bank is offering different rates for retail and non-retail investors. Non-retail investors, who include institutions and high net-worth individuals who invest in bulk, will receive 9.3% for 10 years and 9.45% for 15-year investments. The bank also has an option to pre-pay investors in the 10-year bonds after 5 years and after 10 years for 15-year bondholders.

Senior officials of the bank said that details regarding the opening of the issue would be announced on Tuesday. Although these investments are long-term in nature, investors are assured liquidity through the listing of these bonds.

Investment bankers who are distributing the issue say earlier experience suggests that SBI is bound to receive a huge oversubscription on the first day itself. "There are many banks that are offering 9.5% and above on fixed deposits. But these investments typically are for one-two years and interest rates are widely expected to come down in the long-term," said an investment banker.

SBI`s earlier retail bond issue, which offered a much lower return, was a huge success with the bonds being sold out on the first day. Successful investors got an opportunity to make equity-like gains as the bonds were listed at a 5% premium on listing. While the returns on the bonds are even better, the listing position would depend on the extent of unsatisfied demand in the public issue. Prices of SBI`s earlier bonds fell marginally on Monday, but the securities continue to trade at a significant premium over the issue price.

Although the size of the issue is minuscule compared to the bank`s balance sheet, the issue is part of an ongoing programme to develop a market for long-term resources. The bank presently funds all its long-term loans, which include home loans and loans to the infrastructure sector, through core savings deposits and medium-term deposits. The long-term bonds will enable the bank to match some of its long-term fixed liabilities.

 

By-Economic Times

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Bank of Maharashtra, State Bank of Mysore raise lending rates by 25 bps

MUMBAI: Two state-owned lender-- Bank of Maharashtra and State Bank of Mysore hiked lending rate by 25 basis points in line with other lenders.

Bank of Maharashtra raised the Benchmark Prime Lending Rate (BPLR) by 25 basis points to 13.75 per cent effective yesterday, the bank informed the Bombay Stock Exchange.

This will make all kind of existing loans, including housing and auto loan expensive by atleast 25 basis points.

Besides, State Bank of Mysore has increased its Base Rate or the minimum lending by 25 basis points from 8.5 per cent to 8.75 per cent. The new rate would be effective from February 14.

Country's largest lender State Bank of India raised both lending and deposit rates on select maturities by 25 basis points in response to policy rate hike announced by Reserve Bank on January 25.

Banks have been raising interest rates following a 0.25 percentage point hike in short-term lending (repo) and borrowing (reverse repo) rates announced by the Reserve Bank in its third quarterly review of monetary policy last month.

More than a dozen banks, including Punjab National Bank , Bank of Baroda , Union Bank of India and Indian Overseas Bank has already revised interest rates since January.

By-Economic Times

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Indian Bank ties up with TVS for vehicle finance

CHENNAI: Public sector lender Indian Bank today said it has entered into an agreement with TVS Motor Company for financing the company's vehicles.

"The MoU will help to bring three wheeler drivers into structured banking and enhance Bank's collateral free lending," Indian Bank Chairman T M Bhasin told reporters here.

Through this tie-up with TVS Motor Company, the Bank's loan book by March 2011 would increase to Rs 10 crore and its expected to be touch Rs 75 crore during the next financial year.

"Besides Indian Bank we are having tie-up with other public sector undertaking bank .. But this will highly benefit the borrower as they (Indian Bank) offers them to pay about 15 per cent on the on-road price of the vehicle which is comparatively lower.." TVS Motor Company Vice-President (Sales and Service) Three Wheeler division K Srinivasan said.

Currently, the service available in all the 1,828 branches all over India of these 776 branches are in Tamil Nadu. TVS Motor Company also has about 22 dealers with 300 service station in the State, he added.

By-Economic Times

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Bank trio thrive on low-cost deposits

Calcutta/Mumbai, Jan. 28: Armed with a new base rate system for lending and a significant improvement in low-cost deposits, Allahabad Bank, UCO Bank and Bank of Baroda today reported a hefty growth in their net interest income, resulting in an over 20 per cent growth in net profit for the quarter ended December 2010.

While Allahabad Bank posted a 20.39 per cent jump in net profit for the third quarter of the current financial year at Rs 415 crore, Uco Bank’s net rose 22.35 per cent year-on-year to Rs 301 crore. Bank of Baroda’s net profit rose 28.4 per cent to Rs 1,068.88 crore.

Allahabad Bank’s net interest income (NII) increased 55.67 per cent to Rs 1,051.63 crore, while that of Uco Bank surged 69.10 per cent to Rs 1,062 crore. NII is interest earned minus interest paid.

“In the third quarter, we re-priced all our assets (read, advances) while on the resources side we moved out of bulk deposits and increased the share of low-cost savings and current bank account deposits. This way we have been able to contain our cost of funds and increase the yield on advances,” said J.P. Dua, chairman of Allahabad Bank.

UCO Bank chairman Arun Kaul said instead of depending on bulk deposits, the bank relied more on raising money through certificate of deposits from institutional investors and at the same time increased the share of savings bank account deposits.

On the lending side, both the banks got rid of low-yielding loans following the implementation of the base rate system from September 2010.

BoB’s third-quarter net profit rose to Rs 1,068.88 crore from Rs 832.49 crore last year. A strong demand for loans coupled with a good share of low-cost current and savings account deposits was reflected in the bank’s NII, which rose 43.2 per cent to Rs 2,292.26 crore from Rs 1,601.23 crore last year.

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Robbers loot cash from man in Sivasagar

ORHAT: Unidentified miscreants snatched a handbag from a clerk of an educational institution from the Sonari branch of UCO bank in Sivasagar district on Monday. The bag contained Rs 1.14 lakh. Police have launched an investigation.

Officer-in-charge (Sonari) Durlav Das said, "We have received a complaint from Hamidur Ahmed of the Bampathar area that someone snatched his bag at UCO Bank when he had kept it on a table in the staff room inside the office. He is a clerk of Bampathar Bengenabari Higher Secondary school. The amount he withdrew was the salary of the staff-members of the school."

He also said it was mysterious how the bag was lost from inside the bank. "We have registered a case and our investigation is on. A team of investigators went to the bank. But nothing has been found so far," he added.

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