Bank Of Baroda Announces Swap Ratios For Merger With Dena Bank, Vijaya Bank

The three-way merger between Bank of Baroda, Dena Bank and Vijaya Bank moved a step closer to completion with the Union Cabinet approving the deal and banks announcing share swap ratio for the transaction.

Bank of Baroda said it will set up a grievance redressal cell to address any issues that minority shareholders of either of the three banks might have regarding the swap ratios.

The government in September announced the merger of the three state-run banks. The final nod from the cabinet came on Wednesday.

The merged entity, it said, would be the third-largest bank in India by assets. It will have combined assets worth Rs 6.4 lakh crore and deposits worth Rs 8.41 lakh crore. The combined gross bad loan ratio could be around 13 percent, the government estimated.

As of Sept. 30, the government owned 63.74 percent in Bank of Baroda, 80.74 percent in Dena Bank and 68.77 percent in Vijaya Bank.

Of the three, Dena Bank is under the Reserve Bank of India’s prompt corrective action framework, which places operational restrictions on weak lenders, and has been restrained from further lending. It has a gross non-performing asset ratio of 22 percent—the highest in the industry. Vijaya Bank is among the better performing public sector lenders with a gross NPA ratio of 6.9 percent. Bank of Baroda, the largest of the three, has a bad loan ratio of 12.4 percent.

The combined market capitalisation of the merged entity is currently at Rs 42,301 crore.

“Synergy gains from the merger will likely take a long time to accrue, given the large number of employees at the combined bank, technology integration and legacy PSB issues. Further, visibility on the succession of Mr. Jayakumar remains low, given that his term extension was only for a year,” said JPMorgan.