21st April 2005: According to banking sources, SBI has opted for Nigeria following the stringent capital adequacy norms of the Central Bank of Nigeria. As per the new norms, a bank should have minimum equity capital of $190 million by December 2005. When contacted, SBI chairman declined to comment on the development.
Following the merger, State Bank of India’s (SBI) stake in its subsidiary - Indo Nigerian Bank is expected to come down, said sources. Currently SBI holds 51 per cent stake in Indo-Nigerian Bank Ltd with the remaining being held by institutional investors. It is learnt that the Reserve Bank of India has given the in-principle approval to the merger.
The Indo-Nigerian Bank Ltd is much smaller than Nal Bank with an equity base of $10 million. Nal Bank had an equity base was at $42.7 million (as on June 30, 2004) but this has been upped following an equity issue by the private bank in March 2005. SBI will continue to hold substantial stake in the merged entity even though Nal Bank is a much larger entity, said sources. The merged entity will be a universal bank with NAL Bank’s experience in corporate/investment banking and SBI’s competence in retail banking.
Nal Bank total assets plus contingents stood at Rs 1,114.3 crore or $255 million in June 2004 registering a growth of 17 per cent over the previous year. The bank’s profit before tax for the year ended June 30, 2004, was Rs 36.2 crore or $8.3 million, representing a 367 per cent increase over the previous year.
Indo-Nigerian Bank has total assets of Rs 137.8 crore or $3.15 million and a net profit of Rs 4.79 crore or $1.1 million as on March 2004. Institutional investors hold majority stake of 62 per cent in Nal Bank and Nigerian citizens hold 35 per cent.
The Central Bank of Nigeria is keen on strengthening banks in the country and is urging them to consolidate, said sources. SBI is one of the major Indian banks to have presence in Nigeria.