The Hindu Business Line : Federal Bank keen to raise CSB stake

Kochi, Sept. 30 In a non-predatory move that dovetails well into its long-term growth strategy, Federal Bank has shown interest in acquiring stake in the Thrissur-based Catholic Syrian Bank.

Federal Bank has already acquired 4.99 per stake in CSB from Bangkok-based NRI Mr Surchan Chansrichawla for an undisclosed amount.

“Both organic and inorganic growth have been part of our corporate growth strategy and in case there is no major resentment from the management, employees and shareholders, we would be interested in increasing our stake in Catholic Syrian Bank,” Mr M. Venugopalan, Chairman of Federal Bank, said.

No permission was required for buying 4.99 per cent stake in an old-generation private sector bank, banking sources said. While the RBI is reported to have asked Mr Chawla to reduce his stake in CSB to 10 per cent, the sources were confident that the apex bank would not play spoilsport in one old-generation private sector bank taking over another.

Profit growth

Catholic Syrian Bank has, meanwhile, cleaned up its balance sheet and posted 92 per cent growth in net profit to Rs 36.56 crore for 2007-08. The net NPA has also declined to 1.61 per cent from 1.98 per cent.

The return on assets has gone up from 0.37 per cent to 0.64 per cent. The recent AGM of the bank, which elected Mr C.F. John, Mr Jos C. Chakko, Mr N.R. Achan, Mr C.K. Gopinath and Mr Ipe Peter as directors, also declared an all-time high dividend by the bank at 30 per cent.

The AGM also raised the investment limit by NRIs to 24 per cent of the bank’s paid-up capital, while authorising the directors to raise additional capital of up to Rs 60 crore through issue of equity shares on a preferential or private placement basis to one or more prospective subscribers, including NRI, FII, QIB, etc, as may be permitted by the RBI.

Employee outlook

The employees of CSB also seemed more sanguine to the present merger move. It would be better to move into the fold of a larger old-generation private sector bank where the work culture and environment will be similar, an employee of CSB said.

They were also happy that the merger was not expected to cause disruptions and transfer hardships since a large number of Federal Bank and Catholic Syrian Bank branches were located in Kerala. Some senior staff of the bank, however, pointed to the clean balance sheet of CSB and the sharp spurt in its bottom line and said that there was no immediate distress bailout required by the bank.

When contacted, a couple of directors at CSB refused to comment on the merger moves. Quite a few of them are, reportedly, not averse to it.

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