-
8/12/2019 Bank Mergers in a Consolidation Wave
1/10
Bank Mergers in a consolidationwave ?
Assessment and Emerging
issues
C.S.Balasubramaniam
-
8/12/2019 Bank Mergers in a Consolidation Wave
2/10
The paper discusses
I. Economic back drop of recent
developments
2. Key drivers of M&A in banking sector
3. Recent spate of major M& A deals
among banks and strategic factors
facilitating the M&A wave
4.Concluding remarks
-
8/12/2019 Bank Mergers in a Consolidation Wave
3/10
Economic backdrop
Indian economy has been growing since 2002-03 and grew at 9.4%
in 2006-07
During 2006-07 savings and investments
increased at 32.4 % and 33.8 % Merger Banks initiate and RBI
approves !
Rapid growth rate in GDP did not translate intomuch in terms of
per capital terms due to the
rapid growth in population , real per capitaincome in the
context of rising inflation rate andcost of living and rise in
gross fixed capitalformation .
-
8/12/2019 Bank Mergers in a Consolidation Wave
4/10
Economic backdrop
Growth of GDP- 9% in 2005-06
7.5 % in 2004 -05
8.5 % in 2003-04
Manufacturing sector grew at 12.3 %
Services sector increased by 11 %
In contrast ,agricultural sector rose marginally at
2.7 %,particularly when 60% of population isdependent on this
sector.
-
8/12/2019 Bank Mergers in a Consolidation Wave
5/10
Recent developments
FEMA replaces FERA regulating foreign
exchange transactions
Limits of foreign investment including FDI
were increased
Improvement in credit ratings by S&P,
Moodys and Fitch Overall better environment for investment
-
8/12/2019 Bank Mergers in a Consolidation Wave
6/10
Key Drivers of M&A in banking
sector in India
Diversification of activities in banking
sector
Competitive strategies in operations
become positive after M&A in banks
Revenue and cost synergies materialize
Bancassurance arrangements Capital adequacy compliances due
to
deadlines of BASEL II implementation.
-
8/12/2019 Bank Mergers in a Consolidation Wave
7/10
Bank mergers in a consolidation
wave
SBI has become the biggest among the bigger
banks in India often with the support of
Government
ICICI Bank has also gained in size and turnoveras second largest
bank because of its mergers
of Bank of Madura ,Sangli Bank and
diversification and economies of scope
HDFC Bank also gained in size with its merger
of Centurion Bank of Punjab and Times Bank
-
8/12/2019 Bank Mergers in a Consolidation Wave
8/10
-
8/12/2019 Bank Mergers in a Consolidation Wave
9/10
-
8/12/2019 Bank Mergers in a Consolidation Wave
10/10
Concluding remarks
Capital requirements for merged bankshave become larger for
operationstechnology and capital adequacy reasons
Banks have to become more marketdriven to become successful in
mergers .
Further this will help in tracking the merger
process and gains from merger Quantification of synergies in
costs and
revenue is vital for strategic reasons
