MUMBAI: As investors weighed in the pros and cons of the four set of bank mergers announced on Friday, the Nifty PSU Bank index fell by 4.9 per cent or 121 points to close at 2,354. The four anchor banks saw their prices crash, even though valuations and ratios are yet to be announced.
Shares of Indian Bank crashed 11.96 per cent to Rs 176.25; that of Canara Bank by 10.59 per cent to Rs 197.20, Union Bank by 9.08 per cent to Rs 53.55 and Punjab National Bank by 8.55 per cent to Rs 59.40 on BSE.
“The overall count of SOE banks drops to 12 after the mergers. Maybe all these fulfil a long term vision, but near-term, it may just create more noise,” Jefferies said.
Rationalisation, credit growth and any meaningful cost synergies are under doubt. “Even as the size and scale of operations increase, core profitability for these banks is likely to remain weak. Hence, they will continue to depend on external infusions inviting frequent dilutions,” Credit Suisse said.
Citing worries on management and transition issues, Kotak Institutional Equities said it is placing the public sector banks covered by it — Canara, PNB, Union Bank — under ‘Neutral’ rating.
“Under our swap ratio assumptions (market price), we believe that the negative impact would be the highest for Union Bank and Indian Bank,” Kotak said.