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SBI eyes big overseas buyouts

October 01, 2007 15:54 IST
India's largest commercial lender State Bank of India is keen on big overseas acquisitions that will give it a 'strategic fit' along with new products and access to cheaper capital, chairman O P Bhatt said on Monday.

Engaged in the process of consolidation domestically by merging seven associate banks, SBI would not be keen on small foreign banks worth a few millions just for the sake of acquisitions, Bhatt said.

The philosophy of SBI, whose market capitalisation soared to over Rs 100,000 crore (Rs 1000 billion) last week, is in tune with the global trend as major banks and financial institutions are internationally growing big by mergers and acquisition route.

"In India, we have no such plans (for acquisition)...if at all we will go, we will go for bigger banks (overseas) where we feel there is a strategic fit," Bhatt told PTI. Bhatt said the bank was not interested in buying 3million, 5 million or 10 million dollar banks.

It may be recalled that the state-run lender had two years ago during the tenure of Bhatt's predecessor acquired Giro Bank in Kenya and Indian Ocean International Bank in Mauritius for an estimated $7-8 million each.

"I am not looking for more business, more branches. We are looking at a strategic fit bank in terms of ability to get new products, in terms of raising funds cheaply and easily, in terms of ability to have more capital," Bhatt said.

Elaborating on the acquisition rationale, he said the amount of management time spent on acquiring banks and fulfilling regulatory requirements is the same whether it is a small 10-million-dollar bank or a one-billion-dollar bank.

Bhatt said domestically, mergers may happen within the family -- the associate banks. Last month, SBI started the consolidation process by deciding to merge State Bank of Saurashtra with itself.

Asserting that SBI was the market leader, Bhatt said that merger of seven associate banks with it would help the bank enhance its prudential and exposure norms significantly. "Today, there is a need for consolidation. It will help in increasing my lending capacity," he said.

Apart from the State Bank of Saurashtra, SBI is seeking merger of State Bank of Travancore, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Indore and State Bank of Patiala.

Bhatt said there was a need for achieving economies of scale to increase advances without infusion of fresh capital. "We have looked upon seven banks as seven sisters. We are part of the same family. It is just folding back into the family," he added.

SBI owns 100 per cent stake in two of the associate banks and between 75-98 per cent in the other four banks. SBS has a network of 460 branches and consolidation of the network would help eliminate duplication of branches in the same geographical area. This process would start once the merger gets necessary approvals. Its net profit rose 45 per cent to Rs 87.4 crore (Rs 874 million) in 2006-07.

SBS has paid-up equity capital of Rs 314 crore (Rs 3.14 billion). The total deposits stood at Rs 15,804 crore (Rs 158.04 billion) while total advances were at Rs 11,081 crore (Rs 110.81 billion).  The capital adequacy stood at 12.78 per cent as on March 31, 2007.

Rakesh Pathak and Kumar Dipankar
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