State Bank of India (SBI) is likely to merge one of its five associate banks in the current financial year.
The board of the country’s largest lender has given its approval for the merger, and SBI will now start the process of identifying an associate for the merger.
SBI merged one of its associate, State Bank of Saurashtra, with itself in 2008. State Bank of Indore was merged with SBI in 2010.
According to bank officials, this time the debate is whether the bank would go for a listed entity or an unlisted entity.
The unlisted associate banks are larger than the listed entities.
“The choice is between merging a listed entity and an unlisted entity,” said an official. “Merging an unlisted entity is relatively easier but such banks are huge. The listed entities are smaller but issues regarding swap ratio will have to be looked at. Ideally, we want to merge an associate entity once every two years.”
Of the five associate banks of SBI, State Bank of Hyderabad (SBH) and State Bank of Patiala are unlisted, while State Bank of Mysore (SBM), State Bank of Travancore (SBT) and State Bank of Bikaner and Jaipur (SBBJ) are listed entities.
Apart from State Bank of Mysore, the others have reported profit growth for the quarter ended June.
While SBM’s profit dipped to Rs 40 crore from Rs 64 crore reported during the first quarter of the previous financial year, State Bank of Patiala posted 87 per cent growth in profit, SBBJ’s profit growth was 31 per cent, while SBT and SBH 30 per cent and 18 per cent respectively.
Sharad Sharma, who was the chief general manager in SBI, recently took charge of State Bank of Mysore as the managing director.
The State Bank group has a network of 20,193 branches, including 5,096 branches of its five associate banks.
The five associate banks have six per cent market share in loans and deposits, each.
SBI Chairman Pratip Chaudhari recently said the bank management was giving special attention to State Bank of Mysore to increase its profitability. Incidentally, Chaudhuri was instrumental in the successful merger of SBI with State Bank of Saurashtra — the first associate bank that was merged.