Merger of 10 PSBs into 4: Gains may not accrue soon for investors

Experts say concern over growth, credit cost, and asset quality would restrict valuation improvement despite sharp correction in share prices

Based on their closing stock prices on Thursday, when the share-swap ratios involving the combination of 10 public-sector banks (PSBs) into four were announced, the exercise looks beneficial only for the shareholders of Punjab National Bank (PNB), Oriental Bank of Commerce, and Syndicate Bank.
 
While the mergers are expected to improve the performance of the PSBs over the long term, concern over growth, market share gains, and credit cost could keep a lid on their valuations in the near to medium term.
 
Mona Khetan, analyst at Reliance Securities, says: “Past PSB mergers show that both asset quality and