Higher loan book growth might make Axis Bank to raise Tier I capital
By Joseph Samson
Jul 19, 2012
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Leading private sector bank, Axis Bank which announced its quarterly results yesterday, and reported a 30% growth in credit on yearly basis. This may result in the need for the bank to raise additional tier I capital in the next 12 to 18 months.

The bank's tier I capital adequacy decreased from 11.2 % in FY 10 to 9% in the end of first quarter for the current fiscal. The higher loan growth means more cash requirement, for which the bank may have to raise more capital from the secondary market.

The total advances for the bank are Rs. 171,146 crore, and has delivered a "higher than the system" growth in its loan books. We expect the management to meet its guidance of the above-system-average loan growth," read Angel Research report.

It also added that dilution of equity will be probably "book accretive"( which means to increase the book value of share), and this will further augment the credit growth.

Axis Bank has no immediate plans to raise capital in near future and would only "assess the need for capital requirements in the latter half of this year."

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