Mergers, Acquisitions and

Startups in Banking Sector in

By –
India
Group 4
 SB Indore With SBI

• Partial utilization of brand equity .

• Increasing competition in same business.
• Strengthening itself for global competition.
• Risk mitigation for financial stability.
Positive Impact Of Merger

• More service could be offered to customer .

• Now SBI could better focus on international
competitiveness.
• Better opportunities to employees.
• Profit to the investors of State Bank of Indore with a
swap ratio of 34:100.
Bank Of Rajasthan With
ICICI Bank
 Profit declined.
Net loss of Rs. 0.10 billion in the nine months
ended on December 31, 2009.
 Growing Network.
Expansion of ICICI Bank
Positive Impact Of Merger

• BoR shares on opening itself hit the 20 per cent upper

circuit at Rs 119.4, on a day when the Sensex
declined by 467 points.
• ICICI Bank's branch network would go up to 2,463.
• With this takeover ICICI Bank will cross Rs 4 lac
crore.
 Negative Impact Of
Merger
• ICICI Bank
• Risks arising from BoR's non-performing loans and that
BoR is trading at expensive valuations
• Shares declined by 7.24 per cent to close at Rs 825 on the
BSE
• Bank of Rajasthan
• Salary of employees of BoR will be affected.
• Unions are not satisfied.
• Customer switch over.
Centurion Bank of Punjab
With HDFC Bank
• Past Records–
– Centurion Bank merged with Bank Of Punjab
in 2005. The combined entity merged with
Lord Krishna Bank in 2007.
– HDFC Bank had also merged with Times
Bank till then.
 Reasons
• The combined entity can
capture and ride the growth
in the financial services
industry more optimally.
• CBoP had high operating
costs and NPA’s.
 Reasons (contd..)

• For HDFC Bank –

– It would add scale to its operations,
– Facilitate its expansion to every nook and
corner of the country, and
– Bring on board an experienced management
team
The Number Game
 What’s Hot and What’s Not
Pros
• HDFC Bank gets the top
class management of
Centurion Bank of Punjab.
• Strong two-wheeler,
commercial vehicle and
construction equipment
portfolio. About 40 per cent
of CBoP's total retail assets
comprise home loans, car
loans and personal loans.
• Gains geographical spread,
especially in Punjab and
Kerala
Cons
• Share of low-cost deposits
to decline marginally as
CBoP has a much lower
portfolio of such deposits
than HDFC Bank.
• CBoP has relatively high net
NPAs of 1.31 per cent. This
will affect HDFC Bank's
asset quality.
• Employee integration to be
a big issue as CBoP has a
large workforce.
 What’s Hot and What’s Not
(contd..)
Pros
• Small and medium
enterprises (SME) client
base of 2,500 and advances
of over Rs 1,500 crore.
• Gets 394 branches and
licenses for 350 more when
RBI is being very stingy on
doling out branch licenses.
• CBoP provides the perfect
fit in terms of culture,
strategy and approach to
business
Cons
• Technology integration to
take time and also cost a
packet as the two banks
operate on different
platforms.
• It's an all-stock deal, but
HDFC Bank promoter
HDFC will have to pump
in close to Rs 4,000 crore
to maintain its stake at a
little over 23 per cent.
Awaiting
Bankers
 Others
• Indiabulls’s promoter trio Sameer Gehlaut, Rajiv
Rattan and Saurabh Mittal.
• Kishore Biyani’s Future Group. Biyani recently
lured V. Vaidyanathan from ICICI Prudential to
join him.
• The Kerala-based financing giant - The Muthoot
Group led by George Muthoot
• Sahara India Pariwar led by Subrata Roy
• Ratnakar Bank – Led By Vishwavir Ahuja
They Need to Look Out For

• 6C’s
– Cost Control
– CASA
– Capital Adequacy
– Credit Quality
– Culture
– Customer Focus
 New Bankers
Pros
• Only big companies can bring
in the huge capital required
• Such banks will be able to play
a more meaningful role in
financial inclusion, as they are
able to invest capital in
technology and forge
partnerships
• A higher capital threshold may
be needed to ensure that the
bank operates on a strong
capital base
Cons
• Big business houses may not
necessarily be well governed
• Links with corporate houses
may prevent fair credit
decisions
• Business houses may not be
keen on broader objectives of
financial inclusion
• A prolonged business slump
may threaten the stability of
the banks
THANK YOU!