PSU banks announce share-swap ratios ahead of April 1 merger

Following the footsteps of State Bank of India and Bank of Baroda, the boards of 10 public-sector banks on Thursday approved mergers and issued share-swap ratios to create four large banks in the economy.

The four anchor banks will be Punjab National Bank, Canara Bank, Union Bank of India, and Indian Bank. The merger will be effective from April 1.

Last year, Bank of Baroda took over Vijaya Bank and Dena Bank. Before that, State Bank of India (SBI) had merged all its five associate banks with itself to enter the global top 50 banks’ list in terms of size. Punjab National Bank (PNB) will merge with United Bank of India and Oriental Bank of Commerce to create the largest bank in the country after State Bank of India.

According to notifications to the stock exchanges, Delhi-based PNB will issue 1,150 shares for 1,000 shares of Oriental Bank of Commerce, and 121 shares for 1,000 shares of United Bank of India.

Mumbai-based Union Bank of India will take Andhra Bank and Corporation Bank. Union Bank of India will issue 325 shares for 1,000 shares of Andhra Bank, and 330 shares for 1,000 shares of Corporation Bank.

Bengaluru-based Canara Bank will issue 158 shares for 1,000 shares of Syndicate Bank.

Allahabad Bank said for every 1,000 shares (face value Rs 10) of Allahabad Bank, there would be 115 shares (face value Rs 10) of Indian Bank.

The Union Cabinet had approved the consolidation to build the mega banks “to create more efficient and bigger public sector banks in the challenging environment to meet the credit needs of a growing economy and to achieve operational efficiency by scale of business”. The amalgamation will lead to a wide geographical reach, technology adaption, and, more importantly, better utilisation of scarce capital.

A grievance redress system has been put in place, and a committee has been formed headed by a retired judge. If shareholders have any issue with the swap ratio — for example, if they feel they didn’t get enough time or if they need information — they can raise it. This is the board-approved swap ratio.

“After the committee receives all the grievances, it will have seven days to recommend changes, if needed, which will be the final swap ratio,” said a top official of a PSB to be merged.

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Some PSU banks plan Diwali gifts after improved performance

Public sector banks (PSBs) here like the State Bank of India (SBI) and the Oriental Bank of Commerce (OBC) are planning to give festival gifts to their employees.

The two banks have announced a Diwali gift of sweets/dry fruits/chocolates for their staff worth Rs 1,000.

The competent authority in these two banks have issued instructions to distribute the Diwali gifts well ahead of the festival and that cash should not be given as gift in lieu of sweets/dry fruits/chocolates.

The SBI has instructed that the expenditure will be debited to the accounts of the respective offices and then appropriated from the Staff Welfare Fund for the year 2019-20, if and when allocated.

The OBC's General Manager for Human Resources Development Swarup Kumar Saha in a communication to all the branches and other offices cited the improved financial performance of the bank during the second quarter of 2019-20.

The OBC had posted a net profit of Rs 126 crore logging a growth of 23.53 per cent year-on-year. The operating profit has also increased by 20.99 per cent to Rs 1,176 crore.

The letter also said that the capital adequacy ratio and the asset quality of the banks have also improved and all these happened due to committed efforts of the staff members.

The expenses incurred on Diwali gifts will be debited to the Charges General (Staff Welfare), the OBC letter said.

While this is for the first time that Diwali gifts are given to the OBC staff, an officer association leader in SBI told IANS that it is for the second year in a row that the bank is planning to give festive gifts to their staff members.

When queried whether there is an option for non-Hindu employees to avail of the gift at a later date, for instance a Christian employee availing it during Christmas, the SBI union official refused to answer the question.

For the SBI with an employee base of about 257,000, the outgo towards Diwali gifts would be about Rs 25.7 crore.

A union official questioned the logic of giving gifts only during Diwali, that too by government banks where there are employees belonging to various faiths.

In this connection, DMK spokesperson and Member of Parliament T.K.S. Elangovan told IANS: "These banks are owned by the government of India where people of different religions work. The employees should be given the option of choosing the festival for which he would accept the gift."

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Oriental Bank of Commerce (OBC) Q2 profit rise QoQ

State-owned Oriental Bank of Commerce (OBC) posted net profit of Rs125.9 crore in the quarter-ended September, up 23% year-on-year, as fewer new loan accounts turned bad and on account of a rise in net interest margin. It had reported a profit of Rs112.7 crore in April-June quarter.

OBC’s interest income grew 13.9% year-on-year to Rs4,878 crore in the three months ended September. Gross non-performing assets (NPA) declined 471 basis points (bps) year-on-year to 12.53% in the September quarter, while net NPA fell 413 bps to 5.94%, the bank said in a filing with the exchanges. Bad loans declined due to lower fresh slippages.

The lender’s net interest income grew 14.7% to Rs1,456 crore. Its net interest margin—a key measure of profitability—grew 6 bps year-on-year to 2.62%.

OBC’s provisioning coverage ratio (PCR) increased to 77.13% as of September-end, up 11.8 percentage points from a year ago. PCR is the amount set aside to cover NPAs.

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Oriental Bank of Commerce (OBC) Q1 result, reports net profit

Oriental Bank of Commerce (OBC) posted a net profitof Rs 112.7 crore. The company had posted a loss of Rs 393.2 crore in the year ago period. Bank has posted a profit due to the better asset quality and less provisions. 

Gross NPA of bank stood at 12.56 percent as against 12.66 percent. Net NPA stood at 5.91 percent versus 5.93 percent QoQ.

Net interest income(NII) was up 2.6 percent at Rs 1,371.6 crore.

Provisions for the quarter under review stood at Rs 842.4 crore versus Rs 1,051.5 crore QoQ and Rs 1,539.5 crore YoY.

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Indian Bank opposes merger with OBC, says has well-laid out plan for 3 years

Oriental Bank of Commerce (OBC) may have floated the idea of a merger of two other state-run lenders – Indian Bank and Corporation Bank – into itself, but the Chennai-based bank doesn't seem to be interested. In a statement on Wednesday, Indian Bank said its board doesn't have any such proposal, showing its intent against any such potential merger into OBC should the government ask for its view. “There is no such proposal with the board of the bank,” it said. “The bank has a well-laid out business plan for the next three years, with a clear visibility on growth, earnings and asset quality that create significant value for all its stakeholders.”

Banking sources had told FE that OBC had sought the finance ministry's approval to combine with Indian Bank and Corporation Bank. The ministry would consider OBC's proposal and take a view soon, one of the sources had said.

OBC – which was facing restrictions under the central bank's Prompt Corrective Action (PCA) framework until early February – recorded a net profit of Rs 201.5 crore in the March quarter, compared with a net loss of Rs 1,650.22 crore a year earlier. Even sequentially, the profit surged 39%.

However, Corporation Bank's losses zoomed to Rs 6,581.49 crore during the fourth quarter of FY19, against Rs 1,838.39 crore a year before. Indian Bank saw a net loss of Rs 190 crore in the March quarter, against a net profit of Rs 132 crore in the same period last year.

While the headquarters of OBC is in Gurugram, those of Corporation Bank and Indian Bank are in Mangalore and Chennai, respectively.

Indian Bank's net NPA ratio was the lowest of the three – 3.75%, against OBC's 5.93% and Corporation Bank's 5.71%. At 11.29%, Indian Bank's tier-i capital was higher than OBC's 9.98% and Corporation Bank's 10.52%.

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Big bank theory: This two PSU Banks may merge into Oriental Banks of Commerce (OBC)

With a heavy mandate to push reforms, the BJP-led government may soon kick-start the next phase of consolidation in the public-sector banking space with an amalgamation of three lenders — Oriental Bank of Commerce (OBC), Indian Bank and Corporation Bank.

Banking sources told FE that OBC has sought the finance ministry’s approval to combine with Indian Bank and Corporation Bank. The ministry will consider OBC’s proposal and take a view soon, one of the sources said. However, there is no formal announcement from the finance ministry on the matter yet. Another source said the government may infuse `40,000-50,000 crore into public-sector banks (PSBs) this fiscal, having already provided `1,06,000 crore in FY19.

The merger, if implemented, will be part of the government's efforts to create a few but strong banks with much larger balance sheet to support the rising credit appetite of the fast-growing economy and enable optimum utilisation of resources.

The successful experience of merging State Bank of India with five of its subsidiaries and Bharatiya Mahila Bank, and the amalgamation of Bank of Baroda, Vijaya Bank and Dena bank have given the government confidence that more such consolidation exercises can be handled without any hiccups.

OBC — which was facing restrictions under the central bank's Prompt Corrective Action (PCA) framework until early February —recorded a net profit of Rs 201.5 crore in the March quarter from a net loss of Rs 1,650.22 crore a year earlier. Even sequentially, the profit surged 39%. However, Corporation Bank's losses zoomed to Rs 6,581.49 crore during the fourth quarter of FY19, against Rs 1,838.39 crore a year before.

Indian Bank saw a net loss of Rs 190 crore in the March quarter, against a net profit of Rs 132 crore in the same period last year. While the headquarters of OBC is in Gurugram, those of Corporation Bank and Indian Bank are in Mangalore and Chennai, respectively.

Earlier, there were reports of Punjab National Bank (PNB) amalgamating with OBC and some other smaller banks, such as Punjab & Sind Bank, Allahabad Bank and Andhra Bank. However, given that PNB is still not out of the woods, any such plan may wait until the bank's results for the first quarter of this fiscal are out. PNB recorded losses of Rs 4,750 crore in the March quarter, against a net loss of Rs 13,417 crore in the same quarter last fiscal when the Nirav Modi fraud came to light. It, however, had recorded a net profit of Rs 247 crore in the third quarter of FY19.

Upon amalgamation, the merged entity will have a combined deposits of `6.6 lakh crore and advances of Rs 4.8 lakh crore, said the sources. The net NPA ratio of OBC stood at 5.93%, while that of Corporation Bank and Indian Bank was 5.71% and 3.75%, respectively at the end of March.

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Punjab National Bank (PNB) likely to takeover two or three PSU banks

Punjab National Bank (PNB) is likely to takeover two to three smaller state-run banks -- Oriental Bank of Commerce (OBC), Andhra Bank and Allahabad Bank -- in the next three months, reports Reuters.

The government has been striving to revive the health of public sector banks. In February, it announced a recapitalisation tranche of Rs 48,239 crore for as many as 12 public sector banks in a bid to take them out of Reserve Bank of India’s (RBI) Prompt Corrective Action (PCA) framework. Their lending ability was constrained by RBI when they were put under this framework.

The 12 banks are Allahabad Bank, Corporation Bank of India, Bank of India, Bank of Maharashtra, Punjab National Bank, Union Bank of India, Andhra Bank, Syndicate Bank, Central Bank of India, United Bank of India, UCO Bank and Indian Overseas Bank.

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Oriental Bank of Commerce (OBC) back in black,reports profit in Q4

Oriental Bank of Commerce (OBC) on Monday reported a net profit of Rs 201.50 crore for the fourth quarter ended March 31, 2019. Thé public sector lender had reported a net loss of Rs 1,650 crore in the fourth quarter last fiscal.

For the entire fiscal 2018-19, OBC has reported a net profit of Rs 55 crore, a turnaround of sorts when compared to a net loss of Rs 5,872 crore in the previous fiscal.

The turnaround could largely be attributed to a 109 per cent increase in total recovery and upgradation at Rs 6,597 crore (Rs 3,161 crore) during fiscal 2018-19.

Net NPAs have decreased to 5.93 per cent (Rs 9,440 crore) as against net NPAs of 10.48 per cent at Rs 14,282 crore last year.

Commenting on the bank’s financial performance, Mukesh Kumar Jain, Managing Director & CEO, Oriental Bank of Commerce, attributed the turnaround to three main reasons—containment of slippages; sharp increase in recoveries to the tune of 108 percent on a year on year basis besides over 41 percent growth in retail advances.

Aided by spike in retail advances, the bank’s overall advances grew 15.75 percent in 2019-20. For the current fiscal, OBC is eyeing overall credit growth of 10-12 percent, Jain said.

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