Bank stocks gain across the board after Kotak-ING merger deal

Eighteen bank stocks rose by 0.35% to 6.13% at 10:33 IST on BSE after Kotak Mahindra Bank agreed to acquire ING Vysya Bank to create India's fourth largest private bank.

The BSE Bankex was up 1.75% at 20,557.72 and was the top gainer among the sectoral indices on BSE. It outperformed the Sensex, which was up 0.64% at 28,246.36.

Among PSU bank stocks, State Bank of India (SBI) (up 2.09%), Canara Bank (up 1.45%), Union Bank of India (up 1.63%), Bank of India (up 1.87%), Punjab National Bank (up 1.69%) Syndicate Bank (up 2.51%), Indian Overseas Bank (up 1.85%), Andhra Bank (up 2.27%) and Oriental Bank of Commerce (up 2.45%) gained.

Among private sector banks, ICICI Bank (up 0.35%), Axis Bank (up 2.05%), IndusInd Bank (up 2.03%), Yes Bank (up 3.45%), Federal Bank (up 2.43%), Karnataka Bank (up 5.33%) and HDFC Bank (up 1.02%) gained.

Kotak Mahindra Bank jumped 6.13% to Rs 1,227.95 after scaling a record high of Rs 1,260.90 in intraday trade today, 21 November 2014.

Shares of ING Vysya Bank gained 3.48% to Rs 842.50. The stock scaled a record high of Rs 864.80 in intraday trade on Thursday, 20 November 2014.

The BSE Bankex had outperformed the market over the past one month till 20 November 2014, rising 8.84% compared with the Sensex's 6.2% rise. The index had also outperformed the market in past one quarter, surging 14.1% as against Sensex's 6.66% rise.

The Board of Directors of Kotak Mahindra Bank (Kotak) and the Board of Directors of ING Vysya Bank (ING Vysya) at their respective meetings held on Thursday, 20 November 2014 have approved an all-stock amalgamation of ING Vysya Bank with Kotak Mahindra Bank. The announcement was made after market hours on Thursday, 20 November 2014.

Upon obtaining all approvals, when the merger becomes effective, ING Vysya will merge with Kotak. As per press release, ING Vysya shareholders will receive 725 shares in Kotak for 1,000 shares of ING Vysya. The proposed merger would result in issuance of approximately 15.2% of the equity share capital of the merged Kotak.

In terms of strategic rationale and benefits, Kotak, with 641 branches and relatively deeper presence in the West and North, has a differentiated proposition for various customer segments including HNIs, deep corporate relationships including emerging corporates, a wide product portfolio, including agricultural finance and consumer loans, and a robust capital position. ING Vysya has a strong customer franchise for over 8 decades, with a national branch network of 573 branches and deep presence in South India, particularly in Andhra Pradesh, Telengana and Karnataka. ING Vysya has a large customer base across all segments. It is particularly noted for a best-in-class SME Business, as also for serving large international corporates in India by access to the international relationships of ING Group.

The combined Kotak will have 1,214 branches, with a wide-spread pan-India network, getting both breadth and depth given the strong geographic complementarity between Kotak and ING Vysya. Substantial efficiencies will arise out of the proposed merger, which is likely to result in significant benefits for all stakeholders, be it shareholders, employees or customers, and ultimately the banking Industry, the press release indicated.

Commenting on the announcement, Uday Kotak, Executive Vice Chairman and Managing Director, Kotak Mahindra Bank, said - The opportunities and synergies that this merger will create will place Kotak and its incoming stakeholders from ING Vysya on a new trajectory of excellence and leadership.

Meanwhile, the finance ministry yesterday, 20 November 2014, said that the government is committed to keeping the public sector banks (PSBs) adequately capitalised with the twin objective of meeting the credit requirements of the productive sectors of the economy and meeting the regulatory capital adequacy requirements of PSBs. Towards this end, the government will be infusing Rs 11200 crore in PSBs shortly, the finance ministry said in a statement after a review of the quarterly performance of PSBs yesterday, 20 November 2014.

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