News: SBI wants to unlock value of holdings in associate banks
(TNN 15/09/2006) Mumbai - State Bank of India (SBI) is looking at unlocking value of its holdings in associate banks once it gets legislative sanction for splitting shares in banks and restriction on ownership of shares is removed.
According to SBI chairman OP Bhatt, the bank would like to take advantage of a proposed stock split in the value of shares of associate banks from the current Rs 100 to a much lower denomination. Once the bill to amend the SBI (subsidiary) Banks Act is approved, some of the associate banks would go in for initial public offerings.
Mr Bhatt also hinted that he was personally in favour of a merger of the associates with SBI in the future once approvals are in place, as he sees only large players or niche banks surviving in a competitive banking industry.
The chairman of the associate banks feels that there are no cultural issues in the event of a merger and that the merged entity could offer better products. The present Act restricts the number of shares which an investor can hold to 200 with the voting rights also capped at one per cent of the paid-up capital. This is reckoned to be a hurdle to any future plans of these banks to raise capital although three of the subsidiaries are listed.
SBI controls the equity holdings in these associate banks ranging from close to 100% in some of them to 75% in others. Once the stock is split and a public offering follows, the promoter bank can cash in.
The associate banks of SBI are State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Saurashtra, State Bank of Mysore and State Bank of Indore. The associate banks have a branch network of 4,744 and all of them are full on core banking solutions.
These banks are well capitalised and profitability ratios are also impressive. State Bank of Hyderabad, for instance, tops the list with a net profit of Rs 427 crore and book value of shares of the banks is substantially higher. State Bank of Patiala’s book value of Rs 100 share was Rs 8,915 at the end of FY06.
Little wonder, SBI stands to gain when the IPOs hit the market down the line. Says Mr Bhatt: “The associate banks are all doing well with every passing year. However, small banks have to create a niche for themselves or else they do not have any future, unless they are supported by large entities like ours.”
Any possible merger of associates with SBI would have more pluses than minuses, he says. “There may be some HR issues, but no one will be worst-off. If at all the bank will only become stronger. Besides, there are no cultural issues,” he adds.
According to SBI chairman OP Bhatt, the bank would like to take advantage of a proposed stock split in the value of shares of associate banks from the current Rs 100 to a much lower denomination. Once the bill to amend the SBI (subsidiary) Banks Act is approved, some of the associate banks would go in for initial public offerings.
Mr Bhatt also hinted that he was personally in favour of a merger of the associates with SBI in the future once approvals are in place, as he sees only large players or niche banks surviving in a competitive banking industry.
The chairman of the associate banks feels that there are no cultural issues in the event of a merger and that the merged entity could offer better products. The present Act restricts the number of shares which an investor can hold to 200 with the voting rights also capped at one per cent of the paid-up capital. This is reckoned to be a hurdle to any future plans of these banks to raise capital although three of the subsidiaries are listed.
SBI controls the equity holdings in these associate banks ranging from close to 100% in some of them to 75% in others. Once the stock is split and a public offering follows, the promoter bank can cash in.
The associate banks of SBI are State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Saurashtra, State Bank of Mysore and State Bank of Indore. The associate banks have a branch network of 4,744 and all of them are full on core banking solutions.
These banks are well capitalised and profitability ratios are also impressive. State Bank of Hyderabad, for instance, tops the list with a net profit of Rs 427 crore and book value of shares of the banks is substantially higher. State Bank of Patiala’s book value of Rs 100 share was Rs 8,915 at the end of FY06.
Little wonder, SBI stands to gain when the IPOs hit the market down the line. Says Mr Bhatt: “The associate banks are all doing well with every passing year. However, small banks have to create a niche for themselves or else they do not have any future, unless they are supported by large entities like ours.”
Any possible merger of associates with SBI would have more pluses than minuses, he says. “There may be some HR issues, but no one will be worst-off. If at all the bank will only become stronger. Besides, there are no cultural issues,” he adds.
posted by InCar Group Press Room at 19:01
0 Comments:
Post a Comment
<< Home