The Hindu Business Line : Lord Krishna Bank to merge with Centurion

Merged entity
Will have 361 branches, 12 extension counters
Deposit base of Rs 12, 650 cr
Loan book of Rs 8,873 cr
Combined balance sheet size would be Rs 15,080 cr

Mumbai/Kochi , Aug. 19

A proposal to merge the Kerala-based Lord Krishna Bank (LKB) with Centurion Bank of Punjab, was approved, in principle, by the boards of both the banks on Saturday.

The merger will be subject to the approval of the Reserve Bank of India.

The boards of both banks will meet again on September 4, to decide on the share swap ratio and finalise other details, a joint statement issued by the banks said.

The merged entity will have a network of 361 branches and 12 extension counters across the country with an employee strength of over 6,500. It will have a deposit base of Rs 12,650 crore and a loan book of Rs 8,873 crore. The combined balance-sheet size would be Rs 15,080 crore. The banks have jointly appointed Deloitte Haskins & Sells and N.M.Raji as valuers to decide on the share swap ratio.

For the Kochi-based, unlisted private bank LKB, this is the second merger proposal being considered in recent times. The first one, with the Kerala-based Federal Bank, fell through reportedly on differences of valuation and opposition from the Federal Bank staff union.

The promoter Mr Mohan Puri holds about 65 per cent stake in LKB, which reported a profit of Rs 3.68 crore last year against a loss of Rs 24 crore in the previous year.

On the merger proposal, Mr Shailendra Bhandari, Managing Director and CEO, Centurion Bank, said: "Growing by inorganic means is an important component of our strategy; the proposed merger with Lord Krishna Bank would further improve our franchise and customer proposition across the country, particularly in North India, Karnataka, Kerala, and Maharashtra." Centurion Bank acquired Bank of Punjab in October 2005 and became Centurion Bank of Punjab.

Mr B. Swaminathan, Managing Director, Lord Krishna Bank said, "We have been evaluating various options to create value for our stakeholders as well as employees and felt that the proposed merger was the preferred option. It is a synergistic fit in terms of product offerings and geographical coverage," he said in the statement.

Analysts said that the merger would help Centurion Bank improve its reach in the South. "The merger would give Centurion Bank an expanded retail presence in southern areas such as Kerala, particularly since Centurion Bank of Punjab has strong branch network across northern and western States," said Mr Huzaifa Suratwala, Banking Analyst, Emkay Shares and Stock Brokers Ltd.

"The merger of the two banks would improve Centurion Bank of Punjab's NPA level and asset quality," said a banking analyst with a broking firm. "RBI wanted smaller banks such as Lord Krishna bank to consider mergers to improve their asset quality. So, the merger is as per RBI's consolidation strategy," added the analyst.

Shares of Centurion Bank rose marginally on the exchanges, rising 35 paise on the BSE to close at Rs 23.40 on Friday.

The deposit base of Centurion Bank of Punjab as of June 30was Rs 10,372 crore and that of Lord Krishna Bank as of March 31was Rs 2,279 crore. Net advances of Centurion Bank of Punjab as of June 30were Rs 7,452 crore and of Lord Krishna Bank Rs 1,421 crore, as of March 31.

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