Whether it was Global Trust Bank earlier, or more recently United Western Bank or Sangli Bank, they had to be bailed out by stronger institutions. In all three cases, the regulator had to play mid-wife and see the deal through.
Only in the case of IDBI Bank, which took over the ailing United Western Bank, was the motive immediately visible. It lacked distribution muscle.
Whether Oriental Bank that took over Global Trust needed a presence in the south, or ICICI Bank that took over Sangli Bank, needed a rural portfolio (the official reasons given), remains a matter of debate. HDFC Bank’s senior management is on record that the deal would offer them scale and size. Why this was considered crucial when the bank is already growing at a frenetic pace organically is not clear at this juncture.
Similarly, the exact reason why Centurion Bank of Punjab would want to sell out and join hands with a larger player is unclear. On the face of it, the bank was doing well. It had comfortable capital adequacy, relatively low non- performing assets, a reasonably strong retail franchise and some brand recognition and fairly robust growth in profits. Besides, it had also put through three mergers (Bank Muscat’s India operations, Bank of Punjab, Lord Krishna Bank) on its own. So why did it decide to throw in the towel? For now, there are no answers.
Mergers involve integration of technology, systems, people and culture. With both banks belonging to the new generation bank group, there is an arguable amount of synergy in technology, people and systems. More
HDFC to maintain stake in merged entity(The Hindu Business Line 26th Feb 2008)Housing Development Finance Corporation (HDFC), the promoter company of HDFC Bank, will have to raise Rs 3,900 crore in order to maintain its stake at 23.28 per cent post the merger of the bank with the Centurion Bank of Punjab, said Mr Deepak Parekh, Chairman, HDFC.
HDFC’s stake will come down to 19 per cent post the merger.
“We will decide on the mode of raising the money in the next fortnight or within a month’s time,” said Mr Parekh. HDFC Bank would also consider making a preferential offer to HDFC to enable it to maintain its percentage shareholding in the merged entity.
The housing finance company’s total disbursal for the financial year 2007-08 stands at Rs 32,000 crore.
Though the officials refused to divulge details of fund raising, they said that it would not be difficult for the company to raise funds through internal accruals.
Mr Keki Mistry, Vice-hairman and Managing Director, HDFC, said, “With the kind of disbursements we have seen, it will not be difficult for us to raise Rs 3,000-4,000 crore. We can raise this money in the normal course through internal accruals.”
HDFC Bank has no plans to merge with its parent company, HDFC, at present.
The boards of HDFC Bank and Centurion Bank of Punjab agreed on in-principle merger between the two banks and approved a share-swap ratio of 1:29. More
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