Two mid sized PSU banks Vijaya Bank and Dena Bank are in initial exploratory talks for a possible merger. While there are talks of higher recapitalization for PSU banks, the government is also not dropping the ball on another important issue of consolidation in the banking space.
Discussing Pros and Cons of Merger
Vijaya Bank and Dena Bank are said to be discussing synergies and the boards of both banks are discussing pros and cons of such a move. The alliance, if it gets through would be based on the geographical outreach of both banks. Vijaya has a strong presence in southern states while Dena has presence in Maharashtra and neighbouring states. “The combined entity could lead to a large mid-sized bank along the lines of OBC and take care of the banking needs in South and West India “, a source aware of the development added.
The boards of both the banks are said to be looking at each others balance sheet and future liabilities. Vijaya Bank reported 57% jump in Q1 profits to 255 cr rupees with NPAs at 7.3% of advances while Dena bank narrowed losses to 133 cr rupees with NPAs as a percentage of gross advances, rose to 17.37% as of June 2017.
Dena Bank, currently under Reserve Bank’s prompt corrective action, is looking at improving profitability. Thus, capital requirement post-merger will increase in light of Dena Bank’s high NPA. If blessed by the govt, merger could be completed by end of this fiscal.