The Hindu Business Line : Centurion Bank of Punjab on the prowl for M&As

Looking for
Lord Krishna Bank merger expected to be completed by Q1
Has sought RBI nod for private placement of shares with Bank Muscat
Expects 70% increase in advances, Rs 15,000 crore deposit for 2006-07

MR SHAILENDRA BHANDARI

Bangalore May 17 Centurion Bank of Punjab is still on the prowl for more mergers and acquisitions in its bid to aggressively grow in size.

Speaking at a press briefing here on Thursday, the Centurion Bank of Punjab Managing Director and Chief Executive Officer, Mr Shailendra Bhandari, said: "We are committed to acquisitions and mergers as a strategy for growth."

The bank was awaiting the clearance of the Reserve bank of India and the Kerala High court for completing the acquisition of the Lord Krishna Bank. This was likely to be completed by the end of the first quarter of this financial year.

The bank had also sought approval from the RBI for private placement of 9.5 crore shares with Bank Muscat for raising Rs 250 crore.

He said although the bank had a capital-to-risk-weighted asset ratio of 12.1 per cent, it was making the placement for ensuring that Bank Muscat's shareholding remained above 20 per cent.

As on December 2006, Bank Muscat's stake was down to 17.76 per cent. The merger with Lord Krishna Bank was done through a 5:7 swap ratio (7 shares of Centurion for 5 share of Lord Krishna Bank), and had resulted in shrinking Bank Muscat's equity to under 20 per cent.

Once this round of equity infusion was completed, the bank would not require any capital till September 2008, he added. This was because the tier-one capital would go up from the current level of 11.1 per cent. Capital requirement would, therefore, be only in the form of tier-two capital, for which "we have ample head room", Mr Bhandari said. The merger, he said, would not result in any big increase in the balance sheet. However, the branch network would increase to 403 from the current level of 279 branches, he added.

The bank, he said, would continue to pursue with the retail portfolio to grow its business volume. He said the bank, for the last financial year (2006-07), was expected to show a 70 per cent increase in advances to around Rs 11,000 crore. Deposits were expected to be around Rs 15,000 crore.

He, however, declined to give out any profit figures for the last financial year, since the bank's board was meeting later this month to finalise the results.

However, Mr Bhandari added that the bank continued to have the highest net interest margin of 4.7 per cent, double that of some of its peers.

This was also largely on account of the high yield on assets at 10.3 per cent, among the highest in the banking industry, and on the retail focus, that comprised 69 per cent of its advances.

Its fee-based income, comprising commissions from bancassurance, wealth management, foreign exchange and mutual funds, was around 41 per cent of its gross income. "This is a sustainable source of non-interest income for us," he said.

More Stories on : Mergers & Acquisitions | Private Banks

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