Prospects: The bank seems to have been weighed down by non-performing assets. That the NPAs, after provisioning, are 32 per cent more than the net worth places the bank in a difficult position. If it is forced to make larger provisions going forward, then both the capital adequacy ratio and the profitability will be affected.

The rights offer also does not improve the bank's position significantly since the rise in total capital (includes net worth and non-equity long-term debt) is only of the order of around 25 per cent. In contrast, NPAs are already just a little more than the total capital.

In addition, in the last five years, NPAs have been rising at a compounded annual rate of 32 per cent. It is true that if the economy revives, the rate of accretion to the NPAs will decline. However, the extent of decline is not quantifiable, and the bank may still be vulnerable to even small increases in the non-performing asset base.

The bank's dividend yield does appear attractive. Considering a dividend of 15 per cent, the yield works out close to 10 per cent. However, any acceleration in the provision for NPAs can affect future dividends.

Besides, there are other banks that offer attractive dividend yields and are also much better placed in terms of growth prospects.

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