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18Th Aug 2016
In a move that can potentially trigger a
major consolidation in India's state-run financial services space, the board of
the State Bank of India (SBI) on Thursday approved the acquisition of four
other entities in the industry subject to a host of approvals. The Total Investment & Insurance
Solutions
The entities are: State Bank of Bikaner and
Jaipur (SBBJ), State Bank of Mysore (SBM), State Bank of Travancore (SBT) and
the Bharatiya Mahila Bank (BMB).
The news of this development came after the
close of trading hours of Indian bourses.
According to Religare Capital Markets,
barring SBM shareholders, the share allotment ratio is broadly even for all the
holders. "In our view, even if the allotment ratio is favourable /
unfavourable for shareholders of associate banks, it is unlikely to make any
difference since SBI holds 75-90% in these banks," it said in a research
note.
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| (The Total Investment & Insurance Solutions) |
Religare says asset quality of SBI is better
than its peers. "However," it added, "we do not see any material
improvement in SBI's asset quality upon merger since the asset quality of its
associate banks is weak. In addition, the clean-up exercise should continue for
associate banks in Q2FY17 since their AQR list is substantially different from
SBI. This would further deteriorate their asset quality."
 |
| (The Total Investment & Insurance Solutions) |
In mid-June, the government gave an
in-principle approval to the proposal for the merger of six banking entities
with the country's largest lender, which State Bank of India chairperson
Arundhati Bhattacharya hailed as a "win-win" for all. The Total Investment & Insurance
Solutions
The other two banks that have not figured in
Thursday's list are: State Bank of Hyderabad and the State Bank of Patiala.The Total Investment & Insurance
Solutions
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