City Union Bank Eyes Second Round Of Funding

City Union Bank likely to go in for another round of funding, about Rs 400 crore, in the second half of next year. The bank, of late, got Rs 45 crore by giving a 9.99 per cent stake to L&T. According to the source, the funding would be to meet the long term targets the bank has set for itself, rather than to meeting any regulatory requirement. The bank is looking at achieving a total business of Rs 25,000 crore by 2010-11 (Rs 7,500 crore now), comprising Rs 15,000 crore of deposits and Rs 10,000 crore of advances. It wants its net worth to reach Rs 1,000 crore by that year (Rs 320 crore, now) and see its market capitalisation go up to Rs 2,500 crore (about Rs 350 crore). City Union Bank''s capital adequacy ratio was 12.69 per cent as of December. About two-thirds of its Rs 3,000-crore advances portfolio consists of loans under Rs 3 crore, which come under the head `retail loans''. Because the capital charge on retails loans is lower under Basel-II, City Union Bank''s capital adequacy ratio will increase by about 1.5 percentage points when Basel-II kicks in.