Merger of State Bank of India WITH State

8/8/2019 Merger of State Bank of India WITH State

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MERGER OF STATE

B ANK OF INDORE WITHSTATE B ANK OF INDIA


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INTRODUCTION

State Bank of India

State Bank of India (SBI) a premium and the largest

bank in India which is a Government sponsored

agency, being a PSU bank also it has earned name and

fame across the globe specially standing firmly in

subprime crisis in America and melt down inequity

market globally.


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The bank traces its ancestry back through the

Imperial Bank of India to the founding in 1806 of the

Bank of Calcutta, making it the oldest commercialbank in the Indian Subcontinent.

The Government of India nationalized the Imperial

Bank of India in 1955, with the Reserve Bank of India

taking a 60% stake, and renamed it the State Bank ofIndia.

In 2008, the Government took over the stake held by

the Reserve Bank of India.


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FINANCIALS

Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06

CapitalAdequacyRatio

13.39 14.25 13.47 12.34 11.88

PROFITABLITY

RATIOS

Net ProfitMargin 10.54 12.03 11.65 10.12 11.21

ReportedReturn On NetWorth

13.89 15.74 13.72 14.50 15.94


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BORROWINGRATIOS Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06

Borrowings from RBI as% to Total Borrowings 0.00 0.00 2.51 2.51 0.00

Borrowings from otherbanks as a % to Total

Borrowings

7.93 1.71 15.18 3.16 3.26

Borrowings from othersas a % to TotalBorrowings

29.57 5.13 7.05 8.97 18.41

Borrowings within

Indiaas a % to Total

Borrowings37.51 6.84 24.75 14.65 21.67

Borrowings from outsideIndia as a % to TotalBorrowings

62.48 93.15 75.24 85.34 78.32


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DEPOSITRATIOS Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06

Demand Deposit ofTotal Deposits

15.24 14.92 18.26 18.82 17.89

Saving Deposit of TotalDeposits

52.73 26.71 28.69 29.65 29.66

Time Deposit of TotalDeposits

32.01 58.36 53.04 51.52 52.44

Deposits within India as% to Total Deposits

95.10 95.68 95.77 96.42 96.36

Deposits Outside Indiaas % to Total Deposits

4.89 4.31 4.22 3.57 3.63

PERBRANCH

RATIOS

Operating Income PerBranch

6.80 6.49 5.53 4.57 4.10

Operating Profit PerBranch 1.15 1.27 1.07 0.81 0.71

Net Profit PerBranch -3.02 0.79 0.65 0.47 0.48

Borrowings PerBranch 8.15 4.65 5.04 4.14 3.31

Deposits PerBranch 63.63 64.30 52.33 45.37 41.10


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GROWTH

With 11,448 branches and a further6500+associate bank branches, the SBI hasextensive coverage.

State Bank of India has electronically networkedall of its branches under Core BankingSystem(CBS).

The bank has one of the largest ATM networks inthe region. More than 8500 ATMs across India.

The State Bank of India has had steady growthover its history, though it was marred by theHarshad Mehta scam in 1992.

In recent years, the bank has sought to expand itsoverseas operations by buying foreign banks. It isthe only Indian bank to feature in the top 100world banks in the Fortune Global 500 rating andvarious other rankings


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STATE BANK OF INDORE

One of the nationalized banks in India, State Bank of Indore wasformerly named as Bank of Indore Ltd. It became a subsidiary of

State Bank of India on 1 January 1960, under the State Bank of

India Subsidiary Banks Act, 1959. Bank of Indore Ltd. and came

to be known as State Bank of Indore, after its association with

SBI.

In 1965, State Bank of Indore took over The Dewas Senior Bank

Ltd. as well. The business turnover of the Bank crossed Rs.47000

Crore at the end of December 2008.

Apart from general banking operations, State Bank of Indore has

undertaken multi-faceted banking activities too. It has also

succeeded to great extent in reaching the rural sectors, especiallyagricultural segment in the country.

The State Bank of Indore was initially known as the Bank of

Indore Ltd. From January 1, 1962, this bank became a subsidiary

of the State Bank and thus, it came to derive its name.


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FINANCIALS

Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

Per share

ratios

Reported EPS

(Rs) 1,593.82 1,337.19 1,085.47 794.89 761.01

Dividend per

share 150.00 150.00 150.00 125.00 100.00

Operating profit

per share (Rs) 1,708.58 1,009.45 1,893.86 1,136.23 -112.95


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Profitability

ratios

Operating

margin (%) 11.02 7.93 17.63 14.80 -1.78

Gross profit

margin (%) 10.08 6.32 15.77 11.90 -4.06

Net profit

margin (%) 9.10 9.22 9.92 9.97 10.33

Reported

return on net

worth (%) 17.82 17.77 16.13 13.66 14.73

Return on

long termfunds (%) 144.35 143.42 121.18 94.92 81.98


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Leverage

ratios

Total

debt/equity 18.11 18.76 16.97 16.37 15.28

Owners fund

as % of total

source 5.23 5.05 5.56 5.75 6.14

Fixed assets

turnover

ratio 25.94 21.72 6.56 5.17 14.40


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Payout

ratios

Dividend

payout ratio(net profit) 11.01 13.12 16.16 17.93 14.85

Earning

retention ratio 88.99 86.88 84.62 77.82 85.15

Liquidity

ratios

Current ratio 9.93 8.44 0.48 0.67 0.51

Quick ratio 10.70 9.17 9.39 6.33 7.83


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WHY MERGE?

Social culture became cut-throat, and shifted from

social to commercial compulsions.

Spirit of competition,

The situation became farcical with SBI having

two/three branches on a street, with bank fully or

largely owned by SBI.


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Other reasons:

Saving of staff cost.

Saving on infrastructural cost like premises,

Encashing surplus real estate,

Will rise in clout of SBI (monopoly aspect) .


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STEPS FOLLOWED:

The main legal steps involved in the merger were asunder:

Passage of resolution by Boards of acquirer and

acquiree banks proposing merger.

Passage of Scheme of merger

RBI (i.e. regulator) permission

Fixing of swap ratio

Inviting objections to swap ratio from share-holders

Govt. (i.e. majority owner) permission followed byGazette notification.


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INTERNATIONAL PRESENCE

Regional office of the State Bank of India (SBI),

in Mumbai.

It has branches in many countries as Colombo,Dhaka, Frankfurt, Hong Kong, Johannesburg,

London and environs, Los Angeles, Male in the

Maldives, Muscat, New York, Osaka, Sydney,

and Tokyo.


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In 1990 it established an offshore bank, State

Bank of India (Mauritius). It has two subsidiaries

in North America, State Bank of India

(California), and State Bank of India (Canada).

In 1982, the bank established its California

subsidiary, which now has seven branches. The

Canadian subsidiary was also established in1982 and also has seven branches, four in the

greater Toronto area, and three in British

Columbia.


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BENEFITS

1. Growth and diversification.2. Synergism.

3. Complementary internal fund flow.

4. Efficient financial leverage.

5. Knowledge sharing.6. Tax and strategic advantage.

7. Asset class increase and diversification.

8. Introduction and adaption of new technology.

9. Sharing and market dynamics.

10. Reduction in marketing cost.


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Business Implications:

Administrative setups have to be closed

Branches in close proximity in each other merged

Specialized branches already in SBI will take upbranches of state bank of Indore.


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THANK YOU

Documents

Merger of State Bank of India WITH State