South Indian Bank weighs buyout

The Kerala-based South Indian Bank (SIB) today said it wants to acquire a bank to help double its advances portfolio from the current Rs 7,360 crore.

The board, at its meeting on September 30, decided to set up a four-member team to achieve the objective.

"The reason behind looking at inorganic route (merger and acquisition) is to grow faster if there is synergy. The board has formed a four-member team to identify and talk to prospective banking entities by the end of March 2007," said V A Joseph, chairman of the Thrissur-based private sector bank.

SIB has a strong net worth of Rs 690 crore and had a capital adequacy ratio of 12.04 per cent as on June 30, 2006. SIB's strong capital base would come in handy in acquiring another small-sized bank with some of them failing to meet the regulatory requirement of minimum net worth of Rs 300 crore so far, he said.

The banks which did not adhere to the minimum net worth requirement include City Union Bank (Rs 286 crore), Catholic Syrian (Rs 216 crore), Dhanalakshmi Bank (Rs 134 crore), Ratnakar Bank (Rs 54 crore) and Sangli Bank (Rs 84 crore).

SIB would look at banks with assets size of up to Rs 8,000 crore and there is no preference for any bank from any specific region, Joseph said. This criterion puts also puts Tamilnad Mercantile Bank on SIB's radar, a banking analyst said.

SIB shares ended at Rs 69.60 on the Bombay Stock Exchange on Tuesday, almost flat compared with the previous close. The shares had touched a high of Rs 71.55.

Since the beginning of 2006, four small private sector banks have either gone in for negotiated mergers or were placed under a moratorium and subsequently merged. The latest to be merged under a scheme by the Reserve Bank of India.

Since the beginning of this year (2006) the four private sector banks have either been acquired or are on way to be merged - United Western Bank by IDBI, Ganesh Bank of Kurunwad by Federal Bank, Lord Krishna Bank by Centurion Bank of Punjab and Bharat Overseas Bank with Indian Overseas Bank.