Indian Overseas Bank and Punjab & Sind Bank shares today surged on the news of proposed merger with Bank of Baroda and Punjab National Bank, respectively. Shares of Punjab & Sind Bank were trading up 6.35% at Rs 61.1 on NSE, hitting a 26-month high. Shares of Indian Overseas Bank rose 5.22% to Rs 29.2 at the day’s high.
Meanwhile, the shares of the potential acquiring banks too rose. Shares of Bank of Baroda, India’s second-largest state-run lender were up 2.87% at Rs 181 on the proposed amalgamation of Indian Overseas Bank. While the shares of Punjab National Bank, India’s third-largest state-run bank, rose 2.95% to its day’s high of Rs 163.5.
The surge in share prices of these banks and other lenders on anticipation of healthy earnings pulled up the sectoral indices as well. NSE’s PSU Bank index rose 2.16% at 3619.45 points, touching its highest in 19 months, since August 2015. NSE’s Nifty Bank index also rose in trade, making a new all-time high of 21,947 points.
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The government is pushing for consolidation among the state-run banks in order to help the lenders gain efficiency and scale, and operate without the support of repeated capital infusion to bolster their balance sheets. The government is reported to be mulling creating six large public sector banks of global scale, also with an aim to help the smaller banks with weaker balance sheets get support from the larger ones with strong finances.
Earlier this month, State Bank of India – the country’s largest bank – merged its five associate banks and Bhartiya Mahila Bank with itself effective April 1. The merger will further expand the size of State Bank of India, which, with over 500 million customers now, would be counted among the top 50 banks in the world. The merged entity now has a deposit base of more than Rs 26 lakh crore and advances level of Rs 18.50 lakh crore.
Meanwhile, even the private sector banking space is abuzz with the merger and acquisition talks, as the new-age private lenders with strong retail base and aggressive management look to buy out the older private banks with bleak growth prospects.