New Delhi: Public sector major Canara Bank is on an acquisition spree. According to sources close to the Finance Ministry, Canara Bank has designs of buying Dena Bank and the Oriental Bank of Commerce.
Chairman and Managing Director of Canara Bank M B N Rao is determined to expand the bank's network across the country. If efforts to strike a deal with Dena Bank fail, the PSU has reportedly short-listed Oriental Bank of Commerce (OBC) as a possible acquisition candidate.
For Oriental Bank of Commerce, a merger at this stage could help ease capital crunch within the bank. The bank has nearly exhausted its capital raising ability with government holding close to the minimum limit of 51 per cent.
Canara Bank is strong in the south and has a network of 2,542 branches while Dena with its 1,050 branches is strongest in Gujarat and Chattisgarh, where Canara isn't particularly strong.
Both banks complement each other financially. Canara Bank's rapidly growing asset-book stands at Rs 1,53,339 crore which is five times Dena's asset book of Rs 29,160 crore.
Given its troubled past, Dena Bank's gross NPAs stand at 4.9% compared with 2.06% of Canara.
The net interest margins of the two banks are about the same at 3%, but Canara's price to book is better at 1.21 versus Dena's 0.89
However financials alone will not be sufficient reason for the eventual buyout. The much-talked merger of Bank of India and Union Bank fell through because of the Left and Union pressure, which the government was unwilling to take on.
Though Canara Bank CMD MBN Rao has completely denied the merger talks, speculations of a possible takeover are rife.
With agencies inputs
Comments
0 comment