HDFC Bank, the third largest bank of India, is planning to buy Centurion Bank of Punjab Ltd. Though officials of the two banks said that there is no such speculations at this stage, news is out that today the board members of the two banks is going to held a meeting.
This merger will increase HDFC’s presence in northern and southern region of India. Bloomberg.com reports:
The boards of both banks will meet tomorrow to consider the plan, they said in separate filings to the Bombay Stock Exchange. Centurion, based in Mumbai, fell 1.1 percent today, valuing it at $2.6 billion, after both banks were non-committal on reports about the merger.
HDFC Bank would add 2.5 million customers at 393 branches, extending its reach before overseas lenders are allowed to buy local rivals. The central bank plans to lift curbs on Citigroup Inc. and HSBC Holdings Plc next year to spur competition in the world's fastest-growing major economy after China.
State Bank of India, ICICI Bank Ltd. and other lenders are seeking to grow rapidly before India reviews rules next year. The banks are competing for a larger market share in an economy that's estimated to grow 8.7 percent this financial year.
According to Vishal Goyal, analyst, Edelweiss Capital Ltd., a large network for the bank will ensure more lending and distribution of financial products. If the merger completes than the total number of branches of HDFC would accumulate upto 1,165.
HDFC bank is one of the pioneers in technology based banking in India. A sister concern of Housing Development Finance Corporation Limited, HDFC bank started in 1994. Currently the bank has 10 million customers.
Centurion Bank of Punjab also started in the same year and it has a customer of 2.5 million. In 2003, it bought Sabre Capital Worldwide Inc. In the same year, the bank incurred huge loss by investing in Reliance Power Ltd. Fortunately the bank came out of it from the money it procured from the buying of Sabre Capital. In 2007, Centurion Bank acquired Lord Krishna Bank (According to Forbes, it was in 2006). In 2005, it merged with Bank of Punjab Ltd. and became Centurion Bank of Punjab.
The cost of this merger would worth around $2.5 billion. Shares of Centurion Bank has been determined Rs. 57 per share.
Related articles:
Bloomberg
Forbes
Reuters (1)
Reuters (2)
Business Standard
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It seems that HDFC bank is now seeking to expand its activities in the Northern and Southern region of the country. As you mentioned that Centurion Bank of Punjab has 2.5 million customers, HDFC bank will also acquire these customers. If HDFC offers a technology based banking to the customers of this region then they will be able to capitalize the fullest on their merge with Centurion Bank of Punjab.
Posted by: Biplob Kishore Deb | February 24, 2008 8:19 AM | Permalink to Comment