The shares of Bank of Baroda (BoB) slipped below the Rs100-mark to hit a five-year low on Friday, ahead of its board meeting to consider the government’s proposal to merge Dena Bank and Vijaya Bank with itself.
On Friday, Bank of Baroda’s stock declined 4.7% to end the session at Rs 99.50 on NSE. The stock closed in the red in all sessions barring two since the merger announcement.
While the board of Dena Bank has already approved the merger proposal with BoB and Vijaya Bank, the other two lenders – BoB and Vijaya Bank are scheduled to meet on September 29.
The stock, which has lost close to 48% in the last one year, saw its market capitalisation dwindle to Rs26,323 crore since its record high in 2015.
The government had last week announced its plan to merge BoB with smaller state-run lenders Vijaya Bank and Dena Bank to create the third-largest bank in the country.
Though the stock of Dena Bank reacted positively by hitting upper-circuit on August 18 post announcement, it has pared its gains since then and is down by 5%. The share of BoB lost the most with 26.4% fall whereas Vijaya Bank plummeted 25.4% post announcement.
Analysts were quick at revising the rating on the BoB stock post announcement. While Credit Suisse downgraded the recommendation on the stock to underperform from outperform, Deutsche Bank downgraded its recommendation to hold from buy.
Kotak Institutional Equities observe they don’t see a material impact on the earnings of BoB based on this development. “Impact on BoB financials negligible but provisions and capital infusion likely to decide pricing,” the brokerage said in a recent report.
While the broader Nifty50 gained 3.8% since the beginning of the year, the gauge for state-owned lenders – Nifty PSU Bank Index – came-off 27% during the same period.