Banking sources had told FE that OBC had sought the finance ministry's approval to combine with Indian Bank and Corporation Bank.
Oriental Bank of Commerce (OBC) may have floated the idea of a merger of two other state-run lenders – Indian Bank and Corporation Bank – into itself, but the Chennai-based bank doesn’t seem to be interested. In a statement on Wednesday, Indian Bank said its board doesn’t have any such proposal, showing its intent against any such potential merger into OBC should the government ask for its view. “There is no such proposal with the board of the bank,” it said. “The bank has a well-laid out business plan for the next three years, with a clear visibility on growth, earnings and asset quality that create significant value for all its stakeholders.”
Banking sources had told FE that OBC had sought the finance ministry’s approval to combine with Indian Bank and Corporation Bank. The ministry would consider OBC’s proposal and take a view soon, one of the sources had said.
The news of the potential merger had spooked Indian Bank investors, as its share price had tanked 5% on the BSE on Tuesday, far worse than a 0.5% fall in the Sensex. However, OBC shares gained 2.85% and those of Corporation bank rose 1.21%.
OBC – which was facing restrictions under the central bank’s Prompt Corrective Action (PCA) framework until early February – recorded a net profit of Rs 201.5 crore in the March quarter, compared with a net loss of Rs 1,650.22 crore a year earlier. Even sequentially, the profit surged 39%.
However, Corporation Bank’s losses zoomed to Rs 6,581.49 crore during the fourth quarter of FY19, against Rs 1,838.39 crore a year before. Indian Bank saw a net loss of Rs 190 crore in the March quarter, against a net profit of Rs 132 crore in the same period last year.
While the headquarters of OBC is in Gurugram, those of Corporation Bank and Indian Bank are in Mangalore and Chennai, respectively.
Indian Bank’s net NPA ratio was the lowest of the three – 3.75%, against OBC’s 5.93% and Corporation Bank’s 5.71%. At 11.29%, Indian Bank’s tier-i capital was higher than OBC’s 9.98% and Corporation Bank’s 10.52%.