SBI subsidiaries rally on consolidation move
11 Jun 2014
Shares of the five subsidiary banks of State Bank of India rose to their 52-week highs on Wednesday, following reports that SBI, the nation's top lender, is looking at consolidating its position by merging all its five subsidiaries with itself.
SBI would merge its five associate banks with itself in a move that would bolster its asset base, add more branches and raise market share, The Economic Times reported on Wednesday, citing the bank's chairperson Arundhati Bhattacharya.
SBI's five associates include State Bank of Travancore, State Bank of Hyderabad, State Bank of Patiala, State Bank of Bikaner & Jaipur and State Bank of Mysore.
State Bank of Mysore was the biggest gainer with its stock vaulting as much as 18.6 per cent to hit a fresh 52-week high of Rs640, followed by State Bank of Bikaner and Jaipur, which surged as much as 15.4 per cent to a fresh 52-week high of Rs660, and State Bank of Travancore which rallied 10 per cent to hit a 52-week high of 662.90.
The State Bank of India managed to rally a little over 2 per cent in choppy markets. The stock, however, ended 1.2 per cent higher at Rs2,697 after hitting a high of Rs 2,731 and a low of Rs2,662 a share.
SBI's move to scale up operations is in tune with Prime Minister Narendra Modi's vision for India's economic progress and his emphasis on the need to develop the necessary ''skill, scale and speed'' to compete with a fast-developing China.
The combination of the associates will enhance the asset base of SBI to Rs21,90,000 crore, and add 5,658 branches to its 15,143 branch network.
The combined market share will rise to 24 per cent, from 19 per cent, making it a formidable force. "The timing is very conducive now," SBI Chairman Arundhati Bhattacharya told ET.
State Bank of Travancore ended 8.3 per cent higher at Rs653, State Bank of Bikaner & Jaipur ended up 4.5 per cent at Rs597 and State Bank of Mysore ended 11 per cent higher at Rs 598.
Although SBI had announced consolidation plans much earlier, nothing much happened as the staff unions opposed the move and the previous government's inaction.