The
ICICI Bank Board met today to approve the submission of
an expression of interest to Reserve Bank of India (RBI)
for amalgamation of United Western Bank (UWB) after the
order of moratorium announced by RBI.
In
adition, Federal Bank, Andhra Bank and Allahabad Bank
have also indicated an interest in acquiring the bank,
while according to CNBC-TV18 Canara Bank has already submitted
an expression of interest to Reserve Bank of India (RBI)
to acquire UWB.
HDFC Bank, however, says it is not intersted in acquiring
the bank.
The
suitors believe that UWB's network of 229 branches and
14 extension counters can be leveraged to grow their rural
and small and medium enterprise banking operations in
particular and overall distribution in general.
According to reports the second-largest bank and the
largest private-sector bank in India, ICICI Bank has emerged
as the front runner in the acquisition sweepstakes.
According to Standard & Poor's Ratings Services its
foreign currency ratings and outlook on ICICI Bank (BB+
/ Positive / B), are not immediately affected by the bank's
announcement of its intention to submit a bid for United
Western Bank Ltd.
RBI had announced a moratorium on UWB after its regulatory
capital adequacy ratio turned negative at 0.3 per cent
as at June 30, 2006, and it was unable to meet the 9 per
cent regulatory minimum capital adequacy ratio.
As at March 31, 2006, deposits in ICICI Bank and UWB stood
Rs1,724.51 billion ($37.23 billion) and Rs64.81 billion,
respectively.
But
as of March 31, 2006, UWB had net bad loans of Rs227 crore,
tax disputes of Rs45 crore, restructured assets of Rs550
crore, and net worth of Rs114 crore. However, in
cases where a moratorium is imposed, there are no immediate
cash outflows.
Experts say that the acquirer may have to infuse up to
Rs300 crore.
If ICICI Bank is successful in its bid for UWB, Standard
& Poor's will have to evaluate the impact on ICICI
Banks financial profile, especially its capitalisation.
The
RBI's recent record has been that banks it puts under
moratorium find a suitor in the next 48 hours. It was
true for Ganesh Bank and Global Trust, and now it is true
for United Western, says CNBC-TV18.
Going
by past experience, UWB shareholders may not get anything,
but depositors should see an early end to the moratorium.
Under RBI rules, the central bank alone decides who is
the suitor amongst those interested in the acquisition
. This is done on the basis of the strengths of a suitor's
balance sheet and synergies.
Meanwhile,
the United Western Bank management is assuring account
holders that deposits are safe. But bank officials admit
that the moratorium order is because the bank failed to
meet capital
adequacy ratio norms.
A
R Kulkarni, GM, UWB says, "It may be due to RBI's
capital adequacy norms. It should be 9 per cent, but in
our bank it is on the lower side. That may be the reason
that RBI has implemented this moratorium."
(See:
)
also see : Still
keen to take over UWB: Vijay Kalantri
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