PSU banks to get capital infusion: Angel Broking

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PSU banks to get capital infusion
The Government of India has approved the infusion of capital in some of the PSU banks
through preferential allotment of equity shares. The beneficiary banks include Corporation
Bank (`309cr), Dena Bank (`539cr), UCO Bank (`940cr) and IOB amongst our coverage
universe. In addition to this, Allahabad Bank, Andhra Bank, Syndicate Bank and United Bank
of India (`308cr) are also likely to get capital infusion. Quantum of capital infusion is yet to
be decided in case of IOB, Allahabad Bank, Andhra Bank and Syndicate Bank. The tier-I
capital adequacy ratio for IOB, Dena Bank and UCO Bank was below 8% as of 3QFY2011,
while for Corporation Bank it was slightly higher at 8.1%.
The much-needed capital infusion will enable the banks to grow their advances at a healthy
pace. We believe the infusion will be positive for banks notwithstanding the equity dilution.
However, as of now we have not factored in the proposed infusion into our estimates
pending further details, except in the case of Dena Bank. We maintain our Buy
recommendation on IOB (TP: `166) and Dena Bank (TP: `127). However we recommend an
Accumulate on Corporation Bank (TP: `654) and remain Neutral on UCO Bank.