New Dena-Vijaya-BoB entity eyes 15% return in 5 yrs

The first tripartite amalgamation in the Indian banking sector involving Dena Bank, Vijaya Bank and Bank of Baroda (BoB) became effective from April 1. The merged entity will target to achieve over 15 per cent return on equity (RoE) in next five years and double the market cap of the combined entity, sources said.

"The target of the new merged entity is RoE of greater than 15 per cent in next 5 years, increase in market cap two times and advances growth rate of 14-15 per cent CAGR for next 5 years," official sources said.

The new entity will have a customer base of 120 million-plus serving 9 per cent of India's population and in case of farm loans and corporate lending, this bank would be the second largest in the country, they said.

Bank of Baroda closed 3 per cent higher on the first day of trade after Vijaya and Dena banks merger with it.

Post amalgamation, Bank of Baroda's business metrics will change where CASA (Current Account Savings Account) deposits will increase from Rs 1.96 lakh crore to Rs 2.76 lakh crore and agri advances will increase from Rs 52,000 crore to Rs 80,000 crore.

The large corporate advances will increase from Rs 1.8 lakh crore to Rs 2.41 lakh crore and retail and MSME advances will rise from Rs 1.29 lakh crore to Rs 2.1 lakh crore, said the sources.

Customers will now have access to 9,500 branches and 13,000 ATMs.

State-run Dena Bank and Vijaya Bank are became part of BoB from April 1, marking the first-ever three-way merger in India's banking sector. The amalgamation was first announced in September last year.

Earlier, clarifying the merger policy under which the government created the world's 55th largest banking institution in terms of assets ($535 billion) and 61st in terms of market capitalisation ($40.56 billion) by merging the associate banks with the State Bank of India (SBI), Finance Minister Arun Jaitley had said the government wanted Indian banks to be big enough to be able to compete with international banks.

The amalgamated bank will have net non-performing assets (NPA) of 5.71 per cent taking the new entity clearly out of the prompt corrective action framework of the Reserve Bank of India. It will have the capital to risky asset ratio (CRAR) of 12.25 per cent.

BoB chief P.S. Jayakumar said in a statement that he is "extremely pleased that Bank of Baroda, Vijaya Bank and Dena Bank have come together create the second-largest bank in terms of network and customer base" in India.

--IANS

ana/sn/nir