21st June 2005: Bank of Punjab is set to be merged with Centurion Bank triggering the phase of consolidation among private sector banks. Boards of both the banks met separately today and approved of the merger. Ambit Finance has been appointed as merchant banker to the deal.
Market players expect the swap ratio to be 2:1. In other words, for every two stocks of Centurion Bank, a shareholder will get one stock of Bank of Punjab. The face value of Centurion Bank share is Re 1 while BoP’s face value is Rs 10. “Bank of Punjab will announce its results on June 30. The valuation process will begin after this,” a Centurion Bank official said.
The merged entity will have an asset base of Rs 10,000 crore, said a senior bank official. The deposit base of the entity will be around Rs 7,165.67 crore and the advance portfolio will be around Rs 3,909.87 crore.
The capital adequacy ratio of Bank of Punjab as on March 2004 stood at 12.64% while that of Centurion Bank as on March 2005 stood at 21.42%. The merger will give Centurion Bank access to 120 branches in the northern region and its branch network will swell to 220. The net non performing assets of the merged entity are expected to be around Rs 179.35 crore. The employee strength of the merged entity will be around 2,575.
Shailendra Bhandari, managing director Centurion Bank, had earlier stated that the bank could resort to second phase of capital infusion if it finds opportunities to grow inorganically. “We would be open to the inorganic growth opportunities if its adds shareholder value and offers the bank better business synergies —- by way of better geographical presence and product enhancement,” he had said. The bank in January 2005 had sort shareholder approval to raise additional equity capital of around Rs 600 crore in one or more tranches. The bank recently raised around Rs 350 crore through a global depository receipt (GDR) issue.