The board of state-run Dena Bank Monday approved its merger with Bank of Baroda along with another state-run lender Vijaya Bank.
The board of state-run Dena Bank Monday approved its merger with Bank of Baroda along with another state-run lender Vijaya Bank. Last week, government had announced merger of Bank of Baroda, Vijaya Bank and Dena Bank to create the country’s second largest lender by assets and branches. “The board meeting has decided to recommend for amalgamation of our bank with Bank of Baroda and Vijaya Bank,” Dena Bank said in a filing to exchanges. Consolidation would enable creation of a bank with business scale comparable to global banks and capable of competing effectively in the country and globally, it said.
“Amalgamation of our bank with BoB and Vijaya Bank would result in a strong amalgamated bank, equipped with financial cushion to deal with post-amalgamation requirements during the stabilisation phase,” the city-based bank said. Consolidation would also provide impetus for building banks with scale, ramping up credit growth, adoption of best practices across amalgamating entities for cost efficiency and improved risk management and financial inclusion through wider reach, it said.
The combined business of amalgamated entities would make it second largest state-run bank, after State Bank of India. As of June 2018, the combined business mix of these three lenders stood at Rs 14.82 trillion. While announcing the merger last week, financial services secretary Rajiv Kumar had said the merged entity would have better financial strength.
Dena Bank’s net NPA ratio will be at 5.71 per cent, significantly better than public sector banks’ average of 12.13 per cent, he had said, adding so would be the provision coverage ratio at 67.5 per cent against average of 63.7 per cent and cost to income ratio of the combined entity would come down to 48.94 per cent as compared to average of 53.92 per cent.
The amalgamation of the three banks would be through share swap which will be the part of scheme of merger. In April 2017, State Bank had merged with itself five of its subsidiary banks and taking over Bharatiya Mahila Bank, catapulting it to be among top 50 global lenders with over USD 550 billion in combined assets. Post-merger of BoB, Vijaya Bank and Dena Bank, the number of PSU banks will come down to 19.