Bank of Baroda, Canara Bank may lead next round of mergers

Following the merger of State Bank of India and associate banks, Bank of Baroda and Canara Bank may acquire smaller banks like Vijaya Bank, United Bank of India, Union Bank ofIndia, Dena Bank and UCO Bank, officials told the Business Standard.

Factors such as financial health, the repository of their non-performing assets, the strength of their technological integration, their geographical base, and human resource as the main factors. An official told the paper there would be a rationalization of branches, but no job losses.

An important consideration is that the stressed assets of a bank up for acquisition should not burden the stronger bank. State-owned banks are struggling with over Rs 6 lakh crore of NPAs.

The government is holding discussions with several banks for the possible consolidation of public sector banks, hoping to increase the recapitalization requirement for the current financial year to beyond Rs 10,000 crore stated in this year’s budget.

Bank of Baroda earned a net profit of Rs 1,383 crore in FY17, against a net loss of Rs 5,396 crore in the previous year while NPAs increased by 5.4 per cent to Rs 42,719 crore as on March 31.

Canara Bank earned a net profit of Rs 1,122 crore during 2016-17, against a net loss of Rs 2,813 crore in the previous financial year while gross non-performing assets (NPAs) rose 8.1 per cent to Rs 34,202 crore as on March 31, 2017.

Banks in the public sector reported operating profits worth Rs 1.5 lakh crore in 2016-17, but reported a net profit of Rs 574 crore due to several provisioning requirements.