PSB shares plummet to 10.6 pcs after the merger announcement
New Delhi, September 3 () Public sector banking actions, led by Canara Bank, Union Bank and Punjab National Bank, fell to 10.6 percent on Tuesday after the government announced the merger of 10 state lenders in four.
Shares of Canara Bank fell 10.59 percent, Union Bank of India fell 9.08 percent, Punjab National Bank collapsed 8.55 percent, Oriental Bank of Commerce fell 8.10 percent and Allahabad Bank fell 5.67 percent in BSE.
Corporation Bank fell 3.98 percent, while Syndicate Bank fell 1.08 percent.
However, Andhra Bank gained 0.51 percent and United Bank increased 0.38 percent.
Stock markets closed on Monday for 'Ganesh Chaturthi'.
Continuing its shooting against the deepening economic slowdown, the government on Friday revealed a mega plan to merge 10 public sector banks into four in order to create fewer and stronger global-sized lenders with solid balance sheets that can be used to boost the 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 subsume at Union Bank of India, and Allahabad Bank will merge with Indian Bank.
According to a report by Centrum Broking Research, these mergers will face short-term challenges, such as process integration, human resources, branch network rationalization and financial consolidation.
The logic behind the selection of banks in the merger plan is synergies in geographical presence, technological platforms and scale benefits, with minimal disruption to customers, according to the report. In our opinion, consolidation has generally been detrimental to the strongest banks (acquirers) in the short term and an extended integration period remains a challenge for these entities. We believe that the proposed mergers will face short-term challenges through the integration of processes, human resources, consolidation of finances and rationalization of branch networks, he said. SUM RVK