Capital infusion will lead to book value dilution for banks: Jefferies

Chennai, July 20 (IANS) The recapitalisation of 13 government-owned banks, announced by the central government, will result in dilution of their book value per share for banks with larger capital infusion, investment banking firm Jefferies said on Wednesday.

In a report, Jefferies said: “Banks with larger capital allocations relative to their Common Equity Tier 1 (CET1) are typically the ones to see a steeper dilution of book value per share, given that stock prices for the SOE (State Owned Enterprise) banking space have remained largely depressed for the last several quarters now.”

Based on current market prices, the largest book value per share hit will be seen for Indian Overseas Bank at 28 per cent followed by United Bank of India at 20 per cent. Among other banks affected will be Bank of India (12 per cent) and Dena Bank (12 per cent).

At current market prices, the book value dilution is zero per cent for State Bank of India and three per cent for Punjab National Bank.

The key beneficiaries in terms of CET1 jump are IOB, United Bank of India, Central Bank of India and UCO Bank.

The central government on Tuesday announced capital infusion of Rs.22,915 crore for 13 banks.



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