The Hindu Business Line : HDFC Bank, Centurion boards to consider merger

Mumbai, Feb. 22 HDFC Bank and Centurion Bank of Punjab (Centurion) on Friday confirmed that they are considering a merger proposal. The boards of directors of both the banks are meeting separately on Saturday to consider “in principle” a possible merger, the banks informed stock exchanges.

The boards will appoint independent valuers for deciding on the share swap ratio, said an official familiar with the development. The announcement on share swap ratio is likely to be made on Monday.

Officials of both banks, however, declined to comment on details of the development citing “legal implications”.

After the merger, the combined entity would have a formidable network of over 1,100 branches with a pan-India presence. This would overtake ICICI Bank in terms of branch network (955). However, in terms of balance sheet size, ICICI Bank maintains its lead by a large margin. As on December 31, 2007, the balance sheet size of Centurion Bank of Punjab stands at Rs 25,403 crore and of HDFC Bank at Rs 1.31 lakh crore. ICICI Bank’s balance sheet stands at a much larger figure of Rs 3.76 lakh crore.

Centurion has traditionally adopted the inorganic route to expansion. It took over BankMuscat’s Indian operations in 2003 followed by Bank of Punjab in 2005 and the Lord Krishna Bank in 2006. The merger, an analyst said, would bring the much needed “scale” to HDFC Bank.

Centurion has a large presence in the North and a considerable exposure to the agriculture sector, thanks to its merger with Bank of Punjab in 2005. The merger with Lord Krishna Bank in 2006 has brought a large branch network in Kerala. This would give HDFC Bank an opportunity to leverage the NRI business in the Gulf.

Centurion has 394 branches and 452 ATMs with employee strength of around 7,500. HDFC Bank has a branch network of 754 and is understood to have over 200 more licenses in hand. HDFC Bank has 1,906 ATMs in 327 locations.

While the capital adequacy of Centurion stands at 11.5 per cent, HDFC Bank is at a more comfortable level of 13.8 per cent as on December 31, 2007.

The share price of Centurion on Friday closed at Rs 56.4, which is 1.14 per cent down from the previous day’s close. The scrip opened at Rs 58 and touched an intra-day high of Rs 61.9 and a low of Rs 53.45. The total traded quantity for the day was 2.49 crore shares.

HDFC Bank closed 4.40 per cent lower at Rs 1474.95 with a trading volume of 52,394 shares.

Related Stories:
Centurion Bank scrip surges on merger buzz
Centurion Bank of Punjab open to acquisitions

More Stories on : Private Banks | Mergers & Acquisitions | HDFC Bank Ltd

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