It?s nearly a done deal. In what will be one of the largest M&As in the domestic banking space in recent times, HDFC Bank and Centurion Bank of Punjab (CBoP) on Friday both informed the stock exchanges that their boards would meet on Saturday to consider a possible merger of both banks.
This sets at rest mounting speculation over the past two days about a merger between the two. Sources said the deal would probably be by way of a share swap. HDFC Bank, an arm of housing finance major HDFC, is the country?s second-largest private sector bank after ICICI Bank. The merged entity will have total assets of over Rs 2 lakh crore.
An industry source said the possible merger was a result of an initiative by a senior CBoP official, who is believed to have approached HDFC Bank managing director Aditya Puri to consider a merger in the interests of better synergies. CBoP, the source said, was keen to be acquired by a larger bank.
?There have been major issues with the senior management over the last six months, as a result of which people were quitting CBoP. The bank is also burdened with non-performing assets in trade financing and huge liabilities, as a result of which performance is on a dip,? the source said.
Moreover, the source also highlighted the fact that on account of regulatory issues, the merger with Lord Krishna Bank was also delayed. However, a top executive from CBoP said operations with LKB would kick off in the first week of April.
Promoters hold about 30% in HDFC Bank, while FIIs have another 34.09%. In CBoP, Bank Muscat holds 14.02%, Kephinance Investments has 6.13%, HSBC Financial Service Middle East 4.71%, Sabre Capital 3.48% and Ambit Capital 3.74%, among others.
HDFC Bank has nearly 750 branches and plans to open another 200. CBoP has nearly 400 branches. The merged entity will have around 1,150-1,200 branches.
On Friday, HDFC Bank stock fell 4.4% to close the day at Rs 1,474.95 on a weak BSE. CBoP stock fell 1.14% to close at Rs 56.40.
