PSU bank shares fall up to 9.3% after the merger announcement

NEW DELHI: Public sector banking stocks, led by Corporation Bank and Punjab National Bank, plummeted to 9.3 percent on Tuesday after the government announced the merger of 10 state lenders into four.

Shares of Corporation Bank collapsed 9.28 percent to Rs 17.10, the National Bank of Punjab fell 8.54 percent to Rs 59.40, Canara Bank fell 7.54 percent to its annual minimum of Rs 203.90.

The Oriental Bank of Commerce broke 7.34 percent to Rs 68.10, Union Bank of India 6.79 percent to its 52-week low of Rs 54.90, Allahabad Bank decreased 2.83 percent to Rs 34.30 and United Bank 0.28 percent to Rs 10.39 in the BSE.

However, Andhra Bank rose 5.31 percent to Rs 20.80 and Syndicate Bank earned 3.55 percent to Rs 33.50.

Stock markets closed on Monday for 'Ganesh Chaturthi'.

Continuing its shooting against the deepening economic slowdown, the government on Friday presented a mega plan to merge 10 public sector banks into four in order to create smaller and stronger lenders worldwide with solid balances that can be used to boost credit and stimulate growth.

The mergers announced on Friday, along with two consolidations established last year, will reduce the number of public sector banks to 12 of 27 in 2017.

Oriental Bank of Commerce and United Bank will merge with Punjab National Bank to create the country's second largest lender behind the State Bank of India. In addition, Syndicate Bank will merge with Canara Bank, while Andhra Bank and Corporation Bank will be integrated into Union Bank of India, and Allahabad Bank will merge with Indian Bank.

According to Emkay Global, the merger of Canara and Syndicate could be relatively less disruptive in terms of integration ... Being a strong medium-sized bank, Indian Bank was always susceptible to merger, but the merger with Allahabad Bank instead of IOB will be Less painful.

However, it could be a challenge due to cultural and geographical diversity with Allahabad Bank and its relatively weak asset quality.

GNP has been inherently weak and the fusion could further aggravate and prolong the pain. Being a perennially hungry capital bank, Union Bank should benefit from the capital front due to the merger and has also been graced by the government with an infusion of healthy capital, but that said, the merger will remain painful as a result of the geographic situation. and cultural diversity of the merged entities.