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Finance Minister Arun Jaitley on Monday said that the Centre will soon approve State Bank of India’s proposal to merge its five associate banks and Bharatiya Mahila Bank with itself.
“The proposal (to merge all State Bank of India associates with itself) is pending with the government. The government will respond shortly. Government policy by and large supports consolidation. I had indicated it in the Budget itself,” Jaitley told reporters after his quarterly performance review meeting with chief executives of public sector banks here.
Asked if the Centre had any other consolidation candidates before it, Jaitley replied in the negative. “We are looking at SBI for the moment,” Jaitley said. .
The country’s largest lender, SBI, had on May 17 said it was seeking the Centre’s nod to merge its five associate banks and the newly-created Bharatiya Mahila Bank with itself.
This follows the boards of the associate banks — State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore — approving resolutions on May 17 to pave the way for their acquisition by SBI. Global credit rating agency Moody’s Investors Service had later said that the proposed merger will have limited impact on SBI’s credit metrics.
SBI already fully owns State Bank of Hyderabad and State Bank of Patiala and has majority stakes in the other three — State Bank of Mysore (SBM), State Bank of Bikaner & Jaipur (SBBJ) and State Bank of Travancore (SBT). BMB started operations in 2013 and accounts for less than 0.1 per cent of SBI’s total assets.
Stock prices Moody’s said that based on current stock market prices, acquisition of the outstanding shares in SBBJ, SBM and SBT will cost SBI about ₹1,660 crore. Assuming SBI completes the transaction using its own cash, its common equity tier-1 ratio would decrease by about 12 basis points, it added. In addition, on a consolidated basis, the merger will have limited impact on the financial metrics of SBI, including its asset quality and capitalisation level. From an operations perspective, the merger offers SBI the potential to leverage synergies, Moody’s said.
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