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Our Bureau

Mumbai , June 20

CENTURION Bank and Bank of Punjab have agreed in principle to merge.

The merger will be through a share-swap deal to be decided after due diligence.

The boards will meet again on June 29 to consider the final terms of the merger, a joint release from the banks said.

Mr Shailendra Bhandari, Managing Director, Centurion Bank, said: "There are huge synergies in this merger like different geographies and different products."

Information about the share-swap ratio would be available only after the next board meeting, he added.

While Centurion Bank has a strong presence in the West and the South, Bank of Punjab has a strong presence in the North.

Ambit Corporate Finance is the investment banker for the merger. KPMG India and NM Raiji & Co are the independent valuers to determine the share swap ratio.

The largest shareholders in Centurion Bank are Bank Muscat (25.91 per cent); Deutsche Bank Trust Company Americas (GDR Depository) - 21.59 per cent, and Kephinance Investment Mauritius (7.6 per cent). FIIs in toto hold 12.85 per cent.

At Bank of Punjab, the promoters have 27.02 per cent and the public 48.7 per cent.

Towards end-February, it had been announced that Nova Scotia Bank, Bharati Tele, and ICB Financial (a Switzerland-based FII) would be picking up 4.99 per cent equity each in Bank of Punjab.

Two smaller stakeholders were also expected to join. However, the larger investments are yet to happen, reportedly due to delay in Reserve Bank of India approval.

According to Ms Kanan Shah, research analyst with Networth Stock Broking, consolidation is good for the banking industry.

"Banking has become like a commodity business. For instance, people can bargain on interest rates. In such a scenario, scale is important for survival. Every bank in India is now ready for consolidation."

The merger between Centurion Bank and Bank of Punjab will help Centurion more, as it will be able to expand faster.

"Bank of Punjab would not have done well on its own. It would have had to be acquired either by a private sector bank or by a foreign bank in order to have sustained."

About Centurion's prospects, post-merger, she said, "Centurion is a relatively new bank and its growth has been slow. It takes time to expand and increase the reach. That is why this merger will help."

Fitch Ratings, the international rating agency, has placed the outstanding national ratings of Centurion Bank on `Rating Watch Evolving'.

Fitch currently rates the bank's subordinated debt at `A (ind)' and the Certificates of Deposit programme at `F1(ind)'.

The rating action follows the announcement of the merger.

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