Large Banks eye on Corporation, Andhra & Dena Bank for acquisition

On Wednesday meeting was held between PSU banks and Finance Ministry officials to discuss the consolidation process. Corporation Bank, Andhra Bank and Dena Bank are the main targets for acquisition among the large PSU banks.

In the meeting chiefs of Punjab National Bank, Canara Bank, Union Bank of India, Bank of India and Bank of Baroda were present, they discussed the pros and cons of consolidation among banks in India.

According to anonymous sources from the banking industry, the Union Bank, Bank of Baroda and Punjab National Bank showed interest in acquiring Corporation Bank whereas Canara Bank and Punjab National were interested in Dena Bank.

On the other hand Bank of India has shown interest for acquisition of Oriental Bank of Commerce. Union Bank and PNB are also interested to acquire Andhra Bank.

Bankers said at present discussions are in preliminary stage and it can take very long time to materialize. Sources told the Finance Ministry officials will be meeting CEOs of small to medium size PSU banks to know their views on consolidation. It is believed CEOs of small-to-medium-size banks will most probably oppose their acquisition by large banks on the basis that their loyal customers will leave and also on stand alone basis the performance of banks is better.

Surprisingly, not any of the large banks have shown interest in acquiring any bank located in eastern belt like UCO Bank, Allahabad Bank or United Bank of India as they fear they might have to face resistance from the political front and other labor on this issue.

In the meeting one of the suggestions was put forward that all the three Kolkata based banks should be merged into one. However not any of the large banks were keen in acquiring Bank of Maharashtra, Central Bank of India, Punjab & Sind Bank. According to sources there was lack of interest in case of these banks mainly because of their union problems.

It has been five to six years the government has been having discussion on consolidation among Indian banks. But sources said this time some positive response was seen in the meeting which was not in the previous round of discussion. In this meeting large banks had shown interest on smaller banks through which they can increase their geographical reach and relatively clean balance sheets.

For instances, on Wednesday, PNB prepared a ground for banks which are located in the west including Gujarat and Maharashtra, Union Bank of India and Bank of Baroda has shown interest in southern belt, whereas Bank of India is interested in increasing its presence in the northern region and Canara Bank is also keen in increasing its presence in western India.

Earlier chiefs of Bank of India and Union Bank of India were interested in merger after which they will become strong bank in the western region as both banks major presence in Gujarat and Maharashtra. But the discussions could not materialize because of strong resistance from the Left front.

On Wednesday in the meeting with Finance Ministry banks advised them to formulate rules for M&A. One of the bank chief suggested in the meeting, “Every bank would like to acquire another bank irrespective of its size. Nobody wants to be acquired. But if there is a set rule on which banks are eligible to acquire and what would be to the terms, it would enable banks to work on consolidation.”

World Bank has given $2 billion to government to provide financial support to PSU banks in order to help them in meeting their capital requirement. Many banks have given indication of their capital requirement, to the Finance Ministry so that over the next three years they can maintain growth.

Bankers informed that before giving out the capital to the banks, government is preparing a bid for consolidation.