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| SBI to discuss merger of 5 associate banks with govt, says Bhatt |
| BS Reporter / Mumbai Aug 26, 2010, 00:22 IST |
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SBM to raise over Rs 583 crore through a rights issue
After completing the amalgamation of state Bank of Saurashtra and State Bank of Indore with itself, State Bank of India (SBI) plans to discuss the issue of merging the remaining five associate banks with the government.
SBI Chairman O P Bhatt said the bank would discuss with the government whether it should go ahead with the consolidation of some more associates. There would be consultations with the five associate banks as well to make the process relatively faster and easier.
He was speaking to reporters on the sidelines of a seminar on funding to solar power project organised by the Confederation of Indian Industry.
 The government has already given a nod for merging State Bank of Indore with SBI. Its branch would work as SBI branches from August 26. SBI had already amalgamated State Bank of Saurashtra last year.
Referring to the choice of banks for merger, he said it didn’t matter whether it was listed or unlisted. What mattered was how smoothly it could be done, as SBI had an experience in terms of modalities.
The shares of the three associate banks – State Bank of Mysore (SBM), State Bank of Travancore (SBT) and State Bank of Bikaner and Jaipur (SBBJ) – surged by over 35 per cent in last two trading sessions on buzz about further consolidation.
However, the three stocks fell today. SBM was down by 1.92 per cent to Rs 1,301.6; SBT was down by 8.9 per cent to Rs 959.45 and SBBJ was down by 5.94 per cent to Rs 773.95 on the Bombay Stock Exchange (BSE).
Meanwhile SBM today informed BSE that it was planning to raise over Rs 583 crore through rights issue. The capital raising process is expected to be completed before the end of the year.
The board of SBM has fixed Rs 540 a share price for its rights issue of 10.8 million shares. The ratio for the rights issue is set at 3:10, which means investors who apply for the issue will receive three shares for every 10 shares.
Bhatt said associates were raising extra funds, since the capital requirements for banks were rising or had already risen. SBI wants all associates to be well capitalised just as their parent, which wants to raise about Rs 20,000 crore this year. SBI may raise the funds through a rights issue but has not ruled out looking at other options like follow-on offer.
Six associates, including State Bank of Indore, together posted a 0.54 per cent drop in its net profit at Rs 682.96 crore at the end of June. Their profits dipped due to higher provisioning for non-performing assets (NPAs). Their net interest income grew by 52.22 per cent (year-on year basis ) to Rs 2,565.57 crore at the quarter ended June.
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