Stock Fundamentals

Big merger plan weighs on Bank of Baroda

Radhika Merwin | Updated on September 26, 2018 Published on September 24, 2018

The Centre’s proposal to amalgamate Bank of Baroda, Vijaya Bank and Dena Bank has not gone down well with investors in BoB. The stock has lost 17 per cent since the announcement. Of the three, Dena Bank is among the weakest banks in the PSU bank space, with GNPA of 22.6 per cent as of June 2018 and an abysmal tier I capital ratio of 8.15 per cent. For BoB, a complex merger such as this with a weaker and under-capitalised PSB would put the former’s recovery efforts on the back-burner.

After a period of consolidation, BoB has only in recent quarters seen a pick-up in loan growth, though it is still saddled with bad loans. Hence, investors see this as a major setback for the large PSU lender. Also, there is still uncertainty over the final swap ratio. If the swap ratio is decided based on the market price of the banks before the merger announcement, then BoB investors would not be affected. However, if the price after the event is considered, it will hurt the investors.

 

Published on September 24, 2018
This article is closed for comments.
Please Email the Editor