SBI gains on plan to merge associate banks with itself


State Bank of India rose 1.10% to Rs 179 at 13:15 IST on BSE after the state-run bank said it is considering merger of associate banks with itself.Meanwhile, the BSE Sensex was down 141.22 points, or 0.55%, to 25,632.39.

On BSE, so far 18.11 lakh shares were traded in the counter, compared with an average volume of 25.45 lakh shares in the past one quarter. The stock hit a high of Rs 180.10 and a low of Rs 173.65 so far during the day. The stock hit a 52-week high of Rs 305 on 22 May 2015. The stock hit a 52-week low of Rs 148.30 on 12 February 2016. The stock had underperformed the market over the past one month till 17 May 2016, sliding 7.67% compared with 0.57% rise in the Sensex. The scrip had also outperformed the market in past one quarter, rising 11.25% as against Sensex’s 10.23% rise.

The large-cap company has an equity capital of Rs 776.28 crore. Face value per share is Re 1.

State Bank of India (SBI) after trading hours yesterday, 17 May 2016, announced that it is seeking in principle sanction of the Government of India (GoI) to enter into negotiation with the subsidiary banks viz. State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore and Bharatiya Mahila Bank to acquire their businesses including assets and liabilities. The decision is purely exploratory at this stage and there is no certainty in relation to SBI completing the acquisitions, SBI said. SBI’s board of directors will take a final call after evaluating all the relevant considerations.

State Bank of Mysore (up 8.06%) and State Bank of Travancore (up 3.98%), edged higher. State Bank of Bikaner and Jaipur was down 0.09%.

Government officials were quoted by the media as saying that no legislative changes will be required for SBI merger and that the process may get completed within this fiscal.

SBI Chairman Arundhati Bhattacharya told the media that the benefits of merger would be huge and one of them will be 100 basis points reduction in lending cost within a year post this merger.

Brokerages, which see merger a positive development, reportedly said employee integration and their cost will be the key to watch out for when the merger will take place. According to brokerages, the merger is long term positive for SBI, but financially it may be negative in the near term due to higher retirement cost, reports said.

While explaining the importance of staff cost, a foreign brokerage reportedly highlighted earlier merger of SBI. In its note, the brokerage reportedly said that SBI had to make additional employee provisions in the case of merger with its subsidiaries historically. This was due to likely rationalization of pay scales, and higher retirement related benefits. Currently SBI subsidiaries get only two retirement related benefits versus three at SBI (pension, provident fund and gratuity), reports suggested.

SBI’s net profit fell 61.7% to Rs 1115.34 crore on 6.7% rise in total income to Rs 46731.01 crore in Q3 December 2015 over Q3 December 2014. The bank will announce Q4 results on 27 May 2016.

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