The Manipal-based Syndicate Bank is planning to take over Karnataka Bank. Syndicate Bank is looking at the books of the target bank and is considering appointing a consultant to oversee the takeover.
"We are keen to acquire the Mangalore-based bank because its profile matches ours in all aspects -- origin, work culture and style of functioning," a Syndicate Bank executive closely involved with the acquisition exercise said.
"We had earlier evaluated a listed bank based in Maharashtra for acquisition but dropped the plan because of its poor financials. Karnataka Bank has many strengths, including a cleaner balance sheet and no backing of a strong group or community," the executive said.
"With lower non-performing assets and a strong advances portfolio, it (Karnataka Bank) is an ideal target for acquisition. We are aware that two or three other banks are also eyeing Karnataka Bank, and we want to make a move early," he added.
Michael Bastian, chairman and managing director of Syndicate Bank, said his bank had no plans to take over Karnataka Bank. He declined to comment further.
Anantha Krishna, chairman and CEO of Karnataka Bank, said from Bangalore: "We have not received any proposal from Syndicate Bank and we are not aware of any such move. Earlier, there were some feelers from other banks. But they did not come back."
When asked how an acquirer could get hold of a large holding in his bank, Krishna said: "There are no shareholders who hold more than 2 per cent of the bank's equity. Anybody who wants to purchase shares has to do it from the market."
Only one investor holds more than 1 per cent of the Rs 40.5 crore (Rs 405 million) equity of Karnataka Bank. Indian Syntans Investments has a 1.37 per cent stake.
No individual or group comes under the promoter category, while the public holding is 83.39 per cent.
Corporates hold about 13.08 per cent. Mutual funds, banks, overseas corporate bodies, Non-Resident Indians and trusts together hold about 3.5 per cent.
Karnataka Bank issued bonus shares in a 1:1 ratio and came out with a 1:2 rights issue post bonus during the last financial year.
The bank's capital adequacy ratio improved from 12.96 per cent on March 31, 2002, to 13.44 per cent on March 31, 2003, and its paid-up capital rose to Rs 40.5 crore from Rs 13.5 crore (Rs 135 million).
It declared a dividend of 22 per cent, including on bonus and rights shares, in 2002-03.
The bank did a total business of Rs 12,000 crore (Rs 120 billion) -- Rs 8,291 crore (Rs 82.91 billion) deposits and Rs 3,699 crore (Rs 36.99 billion) advances -- in the last financial year and is targeting a Rs 15,000 crore (Rs 150 billion) business in 2003-04.
Syndicate Bank has 1,750 branches across the country, 60 per cent of them in the southern states.
It also has a major presence in Uttar Pradesh and Maharashtra. On the other hand, Karnataka Bank has 360 branches, the majority of them in its home state.
Syndicate Bank's paid-up capital is Rs 471.94 crore (Rs 4.719 billion).
It has proposed to return Rs 100 crore (Rs 1 billion) capital to the government in two tranches.
The bank did a business of Rs 47,687 crore (Rs 476.87 billion) in 2002-03 and is targeting Rs 60,000 crore (Rs 600 million) this year.
