Govt asks IDBI Bank, UBI to plan merger-TOI
NEW DELHI: After years of debate, the government has set the ball rolling on merger of public sector banks, asking IDBI Bank and United Bank of India to prepare a consolidation plan. This is, however, expected to be preceded by State Bank of India taking its subsidiary State Bank of Patiala into its fold.While the finance ministry and state-run banks are looking at other merger options, work on these two proposals has already started, top-level government sources said. On June 4, TOI was the first to report that the government had begun consultations on consolidation of public sector banks.
There are 27 state-run banks in the country, including five SBI subsidiaries. The government is keen to bolster the weaker entities but has asked banks to prepare a blueprint keeping in mind human resource issues, geographical spread and technology platforms.
While the match-making exercise is so far confined to only four banks, sources said the wider consolidation plan would focus on regional synergies. For instance, Dena Bank may be allowed to merge with Punjab National Bank, while Oriental Bank of Commerce may be headed for integration with Bank of India. Although the proposals are only at preliminary discussion stage, Bank of Baroda, Canara Bank and Union Bank of India have been identified as potential acquirers for the weaker entities.
For instance, United Bank of India was once again hit by loan defaults, which took a toll on its financial health. Similarly, Dena Bank and the other two Kolkata-based lenders — Allahabad Bank and Uco Bank — are seen in need for a helping hand. The government is, however, keen to avoid a merger of South India-based public sector banks given the strong community sentiment.
As a result, sources said that United Bank of India's merger with IDBI Bank made perfect sense. IDBI has a weak presence in the eastern part of the country where UBI has a strong branch network. Besides, IDBI Bank is seen to have a weak retail network, which can be strengthened by the Kolkata-headquartered lender. In addition, both the banks use common software, Infosys' Finacle, which will make the merger easier.
But there are some major hurdles that will need to be overcome. IDBI Bank, for instance, is governed by a different pay scale than other nationalized banks which follow the Indian Banks' Association-negotiated structure. If the proposal goes through, this will be the first merger in the nationalized bank space since Punjab National Bank's takeover of New Bank of India
In contrast, State Bank of Patiala employees will gain from the merger with SBI as they will entitled to more benefits. SBI has already merged two of its subsidiaries - State Bank of Saurashtra and State Bank of Indore - as part of an exercise to reduce the pressure on capital and bring about synergies. Now, the sources said, the focus is on the northern region.
When contacted, IDBI Bank chairman and managing director MS Raghvan said, "Nothing has emerged." An executive at United Bank said that there has been discussion around how the consolidation exercise should be driven but the bank had not been asked to prepare a blueprint.
SBI chairman Arundhati Bhattacharya could not be reached for comment but in a recent interview she had backed the idea of merger of subsidiaries.
Link Times of India
Banks' merger plan on the anvil; SBI and SBP first in queue
New Delhi: The government has asked IDBI Bank and United Bank of India to prepare a consolidation plan. A daily newspaper has reported that the government will first begin merger process between State Bank of India and State Bank of Patiala.
It may be recalled that talks have been going on for long for merging SBI’s subsidiaries with the parent bank. SBI first merged its State Bank of Saurashtra with itself in 2008. Two years later in 2010, State Bank of Indore was merged with SBI.
The country’s largest lender has five associate banks—State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad. Among these, State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore are listed entities.
Finance Minister Arun Jaitley in his Budget speech had said, "There have been some suggestions for consolidation of Public Sector Banks. Government, in principle, agrees to consider these suggestions."
Jaitley, speaking to reporters after the Budget, had said that the consolidation could be between a big bank and its subsidiaries.
PNB mulls buying small-to medium-sized PSU bank-FPJ-26th July 2014
New Delhi : Punjab National Bank is internally exploring the possibility of acquiring a small- to medium-sized public sector bank as part of its expansion plans, two officials of the state-owned lender said.
Punjab National Bank, the fourth largest public sector bank in terms of assets, is keen on acquiring a bank which has strong presence either in western or southern part of the country, one of the officials said.
“We have to explore with those banks which are geographically located in western or southern part, because our presence is less,” the official said. The Delhi-based bank has identified three public sector banks—Indian Overseas Bank, Indian Bank and Dena Bank–as possible targets, the official said. The finance ministry had last month convened a meeting of heads of large public sector banks to explore the possibility of consolidation, the official said.
Another official confirmed that internal discussions are on, but said the actual acquisition could take some time. “There are few complications regarding acquisition and we need some clarity from government. It is a long-term plan and the acquisition may not happen in the current fiscal.”
Meanwhile, Finance Minister Arun Jaitley said that the government has allowed public sector companies to use their surplus cash to buy back their shares or shares of other state-owned companies from the government.
On the government’s divestment programme for the current financial started April, the finance minister said the Cabinet Committee on Economic Affairs has already approved 5% stake sale in Steel Authority of India Ltd and initial public offering in Rashtriya Ispat Nigam Ltd and Hindustan Aeronautics Ltd. -Cogencis
PNB Q1 profit rises 10% to Rs 1,405 cr
Punjab National Bank posted a 10.2% growth in net profit at Rs 1,405 crore during the April-June quarter, helped by a rise in interest income. Total income rose to Rs 12,825.13 crore as against Rs 11,747 crore in the same quarter a year ago, PNB Chairman and MD K R Kamath said. Interest income increased by 11.4 per cent to Rs 11,589 crore against Rs 10,405 crore in the first quarter of the previous fiscal.
The gross non-performance assets (NPA) as a proportion of advances went up significantly to 5.28 per cent against 4.84 per cent at the end of June last year. Net NPA also rose to 3.02 per cent from 2.98 per cent.
Merger and amalgamations are good for health of banking industry.
ReplyDelete