INSUBCONTINENT EXCLUSIVE:
NEW DELHI: A 5 per cent plunge in NSE PSU Bank index said it all.
The announcement for merger of three PSU banks is a long-term positive
for the banks in question, but it triggered selling in several other banking stocks on Tuesday.
Investors were caught off-guard after a few
banking stocks rallied following the announcement of merger among BoB, Vijaya Bank and Dena Bank
Shares of Dena Bank rallied 20 per cent for the day, as it stands to benefit from the proposed merger.
So were the shares of other weaker
banks such as Corporation Bank, UCO Bank, Indian Overseas Bank and United Bank
RBI has 11 banks under PCA, which also include Bank of India, Central Bank of India, Allahabad Bank, IDBI Bank, Oriental Bank of Commerce,
Bank of Maharashtra and United Bank
But, shares of several large banks tumbled
Bank of Baroda tumbled 15 per cent on Tuesday, followed by Union Bank, Indian Bank, Canara Bank and Syndicate Bank, which fell between 6 per
Shares of PNB and SBI fell over 4 per cent.
Market men said there was a fear in the market that the merger announcement will pave the way
for more consolidation, through amalgamation of smaller banks with weak financials into bigger ones that are in the pink of health.
Last
year, five banks were merged into SBI
There have been reports, now and then, on the possibility of smaller PSU banks merging to form a bigger entity
banks such as Indian Bank and SBI, which may have to absorb about a dozen weaker banks, Edelweiss Securities said in a note.
Analysts felt
that while Canara Bank (stronger PSBs) could be a strong contender for merger with smaller banks, others such as Bank of India, PNB and
post this integration to see the preparations needed for other mergers to begin.
Large banks such as PNB and BoI, it said, need more time to
absorb these banks and only Canara Bank seems to be in a relatively better position.
Elara Capital seconded the view
It said considering the fundamentals of Bank of India, PNB and Union Bank, it will not be easy for these banks to absorb smaller PSBs at
this juncture.
Canara Bank, though, is relatively better positioned in terms of core capital (CET at 9.35 per cent) and net NPA, which stood
Therefore, there exists a reasonable probability of Canara Bank taking over some of the smaller PSBs.
Centrum Broking believes the
consolidation in the PSU banking space could further derail growth prospects for the PSU banks.
