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Tuesday, Jul 27, 2004

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GTB merger: Oriental Bank to gain

Veena Venugopal

Mumbai , July 26

WHILE equity investors of Global Trust Bank (GTB) have been left holding shares whose value is not worth the paper it is printed on, Oriental Bank of Commerce (OBC) shareholders have enough reasons to bring out the good china, say analysts. The merger of GTB and OBC without a swap ratio for shares implies that current GTB shareholders will be left with zero value for their investments.

In the meantime, equity analysts are busy reworking and marking upwards their outlook on the OBC scrip. "My earlier research indicated Rs 300 as an attractive price for OBC. Post the merger, however, this would get revised upwards between Rs 320 and Rs 330," said Mr Rajesh Malani, Senior Equity analyst, Pranav Securities.

The OBC scrip opened at Rs 262.85 and touched a high of Rs 283 during the day, before closing at Rs 267.20 on the BSE. The share has appreciated by nearly 17 per cent since the beginning of this month.

The Securities and Exchange Board of India sources said that the GTB scrip would be put in the trade-to-trade segment. The BSE and the NSE have confirmed the same. The scrip is currently quoted at Rs 10.54.

The deal brings significant advantages to Oriental Bank of Commerce, concur analysts. "OBC, along with Allahabad Bank and J&K Bank, have been looking to strengthen their presence in the South. GTB has a very good market presence in the region and this would help OBC quickly expand in the region," said an analyst.

Computerisation and a wide network of automatic teller machines were other areas that OBC was lagging behind in. GTB's latest computer systems and wide coverage of ATMs would help OBC jumpstart its own efforts to introduce cutting edge banking technology and solutions.

"This is a big value addition to the bank. The banking sector today is divided into haves and have-nots based on the technology they use and the level of computerisation that is achieved for their processes. OBC may not have been able to do it well, had they done it alone. While the merger brings with it some problems of integration, overall OBC can use this as a step-up to the `haves'," said a banking analyst with a multinational broking house.

Analysts are also hopeful that the Reserve Bank of India would offer some sops to GTB (and consequently OBC) because of the forced nature of the merger. "OBC will get all the physical assets of GTB and its fairly large deposit base. GTB also maintains SLR and CRR with RBI. Though OBC would acquire the liabilities along with these assets, there would not be a major hit on the balance sheet of OBC," said Mr Malani.

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