Monday, April 14, 2008

DCB looking for merger with larger bank

Merger of banks is gaining impulsion. After voluntary merger of Centurion Bank of Punjab’s with HDFC Bank, there is indication of merger of mid-sized Mumbai-based private sector bank, Development Credit Bank (DCB) with a larger bank. According to sources the DCB bank has opened its doors for merger with a larger bank.

In an interview to the FE top DCB sources told that bank is planning to expand its business in the country for this bank is vigorously thinking of merging itself with a large private sector or foreign bank in India before 2009.

Recently bank has analyzed many options including acquiring of few small banks that can club into a big bank in the country.

A sources from the bank said, “We will open negotiations with other large banks as soon as we find a bank which has a similar business model like ours. Currently, we are reviewing our options. This (a merger) will enhance our profitability, size and the branch network. We believe consolidation is very important for the banking sector to grow”.

“We would like to ‘merge’ rather than ‘get acquired’ by a large bank,” the source added.

When inquired whether DCB will be looking at HDFC Bank for a merger, the source refused to comment.

Interestingly, Nasser Munjee, at present the chairman of DCB, is on the board of HDFC, having a 2.32% stake in the bank. While the Aga Khan Fund, is the largest shareholder with 25.10%, whereas FIIs hold 30.25% stake. Foreign financial companies like Citi (2.06%), Morgan Stanley (3%), Lehman Brothers (3.04%), Merrill Lynch (1.76%) too have stakes in the bank. Recently Tata group has captured 3.78% of the bank’s equity.

This year bank will be raising Rs 150-450 crore to fund its credit growth and operations.

“We will look at raising the required funds after September 2008, through Tier-I or Tier-II bonds. We may look at Tier II capital as there is enough headroom,’’ said an official.

The sources said very soon the bank will be getting into the mutual fund business.

“The mutual fund industry in India is doing really well. We may look at a suitable partner or go on our own depending on the valuation of the business,” the official added.

Currently DCB is in both wholesale and retail banking.

In the past, DCB gained high NPAs from unsecured assets. But by 2007-08, the bank cut its gross and net NPAs to 5.5% and 1.6%, respectively.

No comments: