GTB's shareholders left out in the cold

The shareholders of Global Trust Bank are unlikely to get anything from what is left of the private sector bank. With non-performing assets to the tune of Rs 1,500 crore punching a gaping hole in the Rs 6,500 crore balance sheet of the bank, shareholders are not expected to get any returns as the bank's net worth has turned negative.

This is the first time that a moratorium has been imposed on a listed private sector bank. Regulators have not taken any decision on the suspension of trading in Global Trust Bank shares and the scrip is likely to hit the circuit breaker tomorrow.

It may be recalled that in the case of Centurion Bank, the face value of the bank's shares was reduced to Re 1 in an effort to reduce the losses. The apex bank is looking for a prospective suitor to take over Global Trust Bank, and is approaching banks across the spectrum. It is not averse to wooing even a foreign bank.

With the imposition of the moratorium, the prospective suitor will have time to undertake a proper assessment of the bank.

"Since priority is being given to secure the interests of depositors and their funds lying with the bank, shareholders will be left out," said a bank official.

The only saving grace could be in the event of a suitor paying a price for the branch franchise. With the need for re-profiling, not just of the asset book but also the management and employees at the branch level, the chance of getting a suitor to pay a price seemed unlikely, said a senior foreign bank official.

Even in the cases of Benaras State Bank and Nedungadi Bank, which had been put under moratorium, they were merged into public sector banks with no value addition.

If the apex bank identifies a public sector bank for the acquisition of Global Trust Bank, it will need to be approved by Parliament. In the event of a private bank taking over Global Trust Bank, the approval will have to come from the high court of the state where Global Trust Bank is registered.