MERGER

Bank of Baroda
Dena Bank
Vijaya Bank
 INTRODUCTION

Mergers and Acquisitions is the only way for gaining competitive

advantage domestically and internationally and as such the whole range
of industries are looking to strategic acquisition within India and abroad.
Today the banking industry is counted among rapidly growing industries in
India. A relatively new dimension in the Indian banking industry is
accelerated through mergers and acquisitions.

2
• Bank of Baroda (BoB) is an
Indian multinational, public
sector banking and
financial services company.
• It is owned by Government
of India and headquartered
in Vadodara, Gujarat.
• Based on 2017 data, it is
ranked 1145 on Forbes
Global 2000 list.
• BoB has total assets in
excess of ₹ 3.58 trillion
(making it India’s 2nd
biggest bank by assets), a
network of 5538 branches in
India and abroad, and
10441 ATMs as of July, 2017.
• Vijaya Bank is a public sector
• Dena Bank is bank with its corporate office in
headquartered in Mumbai Bangalore, Karnataka, India.
and it has 1874 branches. • It is one of the nationalized
banks in India. The bank offers a
• The bank was founded in wide range of financial
1938 and the Indian products and services to
government nationalized it customers through its various
in 1969. delivery channels.
• The bank has a network of 2031
branches (as of March 2017)
throughout the country and
over 4000 customer touch
points including 2001 ATMs.
HOW IT STARTED
 WHY THE MERGER
 The government’s decision to merge three banks it owns—Bank of Baroda, Dena Bank and
Vijaya Bank—is expected to reduce the amount of capital it needs to pump into these
lenders and help clean their balance sheets.

 In October, the government set up an “Alternative Mechanism” comprising Jaitley, defense

minister Nirmala Sitharaman and railways and coal minister Piyush Goyal, as an approval
framework for proposals to merge state-run banks.

 For long, it has been recognized that having several banks that are majority-owned by the
government, virtually doing the same business, and competing for the same pie of
customers wasn’t a sensible strategy. It also meant a lower return on the capital employed
by the government which has competing demands for funds, and growing competition.

 The government and banking regulator RBI have also emphasized the changing face of
banking marked by technological changes; challenges to raising capital that the owner
(the government) has to provide periodically; the need for consolidation in the sector and
putting an end to fragmentation.
 The government and banking regulator RBI have also emphasized the changing
face of banking marked by technological changes; challenges to raising capital
that the owner (the government) has to provide periodically; the need for
consolidation in the sector and putting an end to fragmentation.

 More importantly, the weak state of some of the banks may have been the tipping
point. That’s the difference between the attempts in 2007-08 and now — at that
time the proposal involved a merger of two strong banks riding the wave of growth,
but this time it will feature at least one very weak bank — Dena Bank, which has
severe restrictions on lending and expanding its business.

 One final aim of the Government that reflected in the early 2016 financial
statement of RBI was to consolidate banks in such a way that they focus on their
specialized business more than the unrealized obligations to conform to each
regulation of a multidimensional bank. In short, from multidimensional structure to
unidimensional structure.
 ADVANTAGES
 It reduces the cost of operation

 The merger helps in financial inclusion and broadening the geographical reach of the
banking operation

 NPA and risk management are benefited

 Merger leads to availability of a bigger scale of expertise and that helps in minimizing the
scope of inefficiency which is more in small banks

 The disparity in wages for bank staff members will get reduced. Service conditions get
uniform

 Merger sees a bigger capital base and higher liquidity and that reduces the government's
burden of recapitalizing the public sector banks time and again

 Redundant posts and designations can be abolished which will lead to financial savings
 DISADVANTAGES

 Many banks have a regional audience to cater to and merger destroys the idea of
decentralization.

 Larger banks might be more vulnerable to global economic crises while the smaller ones can
survive

 Merger sees the stronger banks coming under pressure because of the weaker banks.

 Merger could only give a temporary relief but not real remedies to problems like bad loans and
bad governance in public sector banks

 Coping with staffers' disappointment could be another challenge for the governing board of
the new bank. This could lead to employment issues.
 CHALLENGES

1) Size of an organization.

2) New geographies

3) Technology integration

4) Workforce troubles

5) Culture.
Should PSU’s Merge ? Why ?
The merger of Public Sector Units (PSU) is considered as a ‘Boldest Move of Government.

The success of merge may be dependent on how the challenges for merger is faced.

Opportunities for PSU Merge Challenges for PSU Merge

1) Reduces Governance Challenge. 1) NPA Problem may continue.

2) It creates larger bank. 2) Every thing needed to manage

carefully-
3) Economies of Scale increases with STAKEHOLDERS
technology. EMPLOYEES
REGULATORS
4) Reduce urgency of Capitalization. CUSTOMERS

5) Rationalization of Branch Network. 3) Finding & Integrating skills.

 BOB 5,81,484

DENA 1,03,020

VIJAYA 1,57,326 DEPOSITS IN MERGED

ENTITY(IN CR)
0 1 2 3 4 5
8,41,8330

Your logo
 BOB 56,361

DENA 13,440

VIJAYA 15,874 EMPLOYEES IN MERGED

ENTITY
0 1 2 3 4 5
85,675

Your logo
 BOB 35.5%

DENA 39.80%

VIJAYA 24.91% CASA RATIO IN MERGED

ENTITY
0 1 2 3 4 5
34.06%

Your logo
 BOB 5.45

DENA 11.04%

VIJAYA 4.01% NET NPA OF MERGED

ENTITY
0 1 2 3 4 5
5.71%

Your logo
 Amalgamated Punjab National
Parameters SBI Bank of India
bank Bank

Total business 14.82 47.37 8.78 10.84

(Rs lakh crore)

Gross advances 6.4 19.9 3.63 4.53

(Rs lakh crore)

Total deposits 8.41 27.47 5.14 6.36

(Rs lakh crore)
Branch 9,489 22,428 5,106 6,940
presence
Return on assets -0.02 -0.57 0.06 Negative
(%)

Tier-1 CET (%) 9.32 10.53 8.01 7.33

CRAR (%) 12.25 12.83 11.43 9.62

Net NPA 5.71 5.29 8.45 10.58

Employees 85,675 2,59,980 48,680 74,897
THANK YOU