ICICI Bank could be the next lender to mop up funds as reports of the bank planning to raise up to Rs 23,000 crore sent its shares crashing over 7 per cent on Wednesday.
Several commercial banks have plans to raise capital or have already mobilised funds amid the Covid-19 pandemic, which is expected to see a surge in their bad loans, necessitating more provisions.
The fall in the ICICI Bank counter came after Bloomberg reported that it was planning to raise as much as $3 billion in a share sale to improve its capital ratios. The report added that the lender will soon start discussions with potential advisers for the offering and that the sale could happen as early as September, though the timing could change depending on the market conditions.
This led to the ICICI Bank scrip hitting a day’s low of Rs 376.05 — a fall of nearly 8 per cent. Thereafter, the share settled at Rs 348.40, a drop of 7.35 per cent, or Rs 27.65, over the previous close.
Reliable sources from the industry, however, said that the bank has so far not taken any decision to raise funds and that even if it were to mobilise capital, the amount will not be as large as $3 billion.
Banks and other financial entities have been on an overdrive to raise fresh funds. Recently, the board of HDFC Bank had approved the issue of perpetual debt instruments, tier-II capital bonds and long-term bonds for a total amount of Rs 50,000 crore over the next 12 months through the private placement mode.
Similarly, the committee of directors of HDFC had approved a proposal to mobilise up to Rs 14,000 crore through various means that include issuance of equity shares or compulsorily convertible debentures and non-convertible debentures.
Last month, the board of Axis Bank had okayed a proposal to raise up to Rs 35,000 crore through the issue of debt instruments.
Similarly, an executive committee of the SBI board approved a proposal to raise up to $1.5 billion. Earlier this month, Kotak Mahindra Bank had mobilised Rs 7,442 crore through a qualified placement of shares.
Rating agency Icra had earlier said that the capital requirements for banks will mount amid the deteriorating asset quality. It expects the gross NPA in the system to rise to 11.3-11.6 per cent by March 2021 from an estimated level of 8.6 per cent for March 2020.
The rating agency had added that credit provisions will continue to exceed the operating profits for the public sector banks (PSBs) during this fiscal, translating in a sixth consecutive year of loss and that the profitability of private sector banks will also moderate.