Indian Bank-Allahabad Bank merger‘will create a truly pan-India entity’

Indian Bank-Allahabad Bank merger‘will create a truly pan-India entity’

Indian Bank will retain its USP and gather more strength and scale in the next 3-4 years, says CEO Padmaja Chunduru

Indian Bank has the metrics to be the anchor bank in its merger with Allahabad Bank, and the amalgamated entity would truly be a pan-India one, according to a top official of Indian Bank.

“Of course, Allahabad Bank is older than Indian Bank. But Indian Bank is bigger now. If you go by the numbers such as total business and assets, we are definitely higher than Allahabad. We are at least half-a-lakh-crore more than them in total business,” Padmaja Chunduru, Managing Director and CEO of Indian Bank, told BusinessLine.

Industry analysts had indicated that of all mergers, the amalgamation of Indian Bank and Allahabad Bank would be challenging as Indian Bank was trading at a lower valuation and had lower market capitalisation despite better performance than Allahabad Bank.

But Chunduru said valuation was still to be worked out and it will be a fair one. The dilution impact may not be high for the shareholders of Indian Bank.

The biggest shareholder in Indian Bank is the government of India, which has 80 per cent stake.

“Indian Bank will retain its USP and gather more strength and scale in the next three to four years. So, it will still make very good sense to stay invested in Indian Bank for long-term gains,” she said. Chunduru also explained that Indian Bank would able to maintain its growth parameters post merger. In the last 12 years, Indian Bank has been continuously profitable and not been seeking capital from the government. It has been maintaining strong capital adequacy ratio, while the asset quality is much better than its peers amid challenging market conditions.

She pointed out that there were strong synergies in the merger, and the combined entity would have several positive parameters for further growth.

“In the last one year, Allahabad Bank has improved its metrics. It came out of the PCA and did some capital infusion. I hope the momentum will pick up and they will be able to perform better,” she added.

The NPA will also be at 4 per cent in the merged entity. In terms of capital, both banks maintain above requirement levels. The combined balanced sheet will have comfortable CAR.

“In terms of bank branches, the geographical overlap will be the least, which is a huge plus in this merger. There could be very few merger of branches. Also, there is no chance of retrenchment. Because we need all the people we have for future growth,” she said.

Indian Bank is strong in southern India; it also has a presence in western India. Allahabad Bank is strong in eastern India and is present across northern and central regions. But Allahabad Bank has 300 branches more than Indian Bank.

Cultural integration

Chunduru also said the cultural integration would not be very difficult because Indian Bank had been recruiting people from across India.

The proposed merger of Indian Bank and Allahabad Bank will create an entity, which will be the seventh-largest PSB, with business of 8.08-lakh crore (about 1.9 times of pre-merged Indian Bank) and a nation-wide spread of over 6,100 branches and 43,000 employees.

[“source=thehindubusinessline”]