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Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
Consolidation in Indian Banking Industry
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Consolidation in Indian Banking Industry

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A snapshot of the Indian Banking Industry by a student at We School.

A snapshot of the Indian Banking Industry by a student at We School.

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  • Rbi guidelines…carry a laser pointer…make table from profile of indian banks… Basel 1 2 3 norms, Components of capital Technology Rates and significance SWIFT/ NEFT/ RTGS ASSOCHAM Treasury activities of bank NPA S
  • I actually don’t knw the answer of this…Ask sir!!...underbanked population of India??
  • What is cost of funds??? For speech: The business of all SCBs grew at a CAGR of 23.7 per cent between 2003-04 and 2009-10. During the same period, the business of other scheduled commercial banks (OSCBs) (private banks) grew at a CAGR of 24.5 per cent, while nationalised banks showed the highest CAGR amongst all the bank groups at 24.6 per cent. Foreign banks witnessed the lowest growth of 22.3 per cent in terms of advances between 2003-04 and 2009-10, while SBI and associates saw the lowest increase in total deposits at 18.4 per cent during the same period. The share of nationalised banks in the total business has increased slightly to 51 per cent from 50 per cent, since 2003-04.
  • Still needs to b worked on….
  • Secondary Objective Strengthen The Capital Base Developing new product and service mixes
  • Do not put why BOI, but remember it at the back of ur mind… we only need to show justification for dena bank
  • Prefrential equity(600)
  • FinacleFinacle (cost adv) –Integration of database (cost adv) –Integration of database
  • cultures could become a liability for an organization by creating barriers to change, barriers to diversity or barriers to mergers and acquisitions PSB & PSB would have an upper hand as far as culture and working culture. ( interview with BOI )
  • reducing overlap in operations, right-sizing and redeploying surplus staff either by retraining.. Psb low profit per employee n private high..s common prob hence common soln.. Profit per employee of psb 5.34lakh in3009-10 n private 7.19lakh..foreign is 17.19lakhs
  • NIM, NII, CAR, INTERSET SPREAD
  • Why DCF?...CHANGE POINTS AFTER DECIDING N DISCUSSING ABT VALUATION…MENTION ABOUT CONSTANT GROWTH MODEL…Discounted at respective WACC taken a constant rate of 5% for the Continuity Value and discounted it to arrive at the Final Value
  • HIGHLIGHTED OPERATING EXPENSES INSTEAD OF EQUITY DIV
  • DON’T HIGHLIGHT PREF SC-UNIFORMITY ..SO HIGLIGHT DEPOSITS N ADVANCES
  • New issue of equity…286 db eq SC/3.17 Assumption of preference (govt infusion ) being in merged entity
  • Mention about restructuring being an advantage for BOI
  • lead banks and RRBs,
  • Talk of win win situtation as dena’s obj of goin Intl achieved an d also helpful for BOI
  • Basel 2, risk weghted assets, difference bewteen CAR and CRAR
  • Write abt needs of indian banking what sir explained…HR reskillin n retraining…succession…infra neeed…retail bankin…first step towards long term vision of having only 5-6 large banks
  • Transcript

    • 1. Consolidation in Indian Banking Industry The M&A way
    • 2. The Flow 10/08/2010
    • 3. 10/08/2010 1.13 Billion People 168 Commercial Banks 84,000 Branches So are we Under-Banked or Under-Served??? Source: World Bank, World Development Indicators & RBI
    • 4. The Indian Banking Industry 10/08/2010 Source: RBI (In Rs. Cr) Growth between 2004-2010 Business of SCBs  23.7% Business of other SCBs (private banks)  24.5 per cent Business of Nationalised banks  24.6 per cent Particulars ( As per FY 10) Nationalized SBI & Associates Private Foreign Aggregate Deposits 2583716 1108086 822801 237853 4752456 Advances 1843102 858198 632494 163260 3497054 Cost of Funds 5.35 5.32 4.83 2.82 5.09 Yield on Assets 1.00 0.91 1.28 1.26 1.05 Net NPA Ratio 0.91 1.50 1.03 1.82 1.12
    • 5. Future of Indian Banking
      • Banking Industry 2010-11
        • Credit growth expected to revive
        • Deposits to grow around 20 per cent
        • CASA of PSB’s to get stronger to about 38%
      • Needs of Indian Banking
      10/08/2010 Source: CRISIL Research, RBI G R O W T H
    • 6. 10/08/2010 - P. Chidambaram
    • 7. Proposed Merger 10/08/2010
    • 8. Objectives Of The Proposed Merger 10/08/2010
    • 9. Parameters For Selecting Target Bank 10/08/2010
    • 10. Quality Of Capital
      • The Capital Cycle & Need for Capital
      • Tier 1 Capital
      • Government v/s Public Holding
      10/08/2010 PSB % of Govt. Holding Canara Bank 73.20 Bank Of India 64.47 SBI 61.43 Punjab National Bank 57.80 Union Bank Of India 55.43 Vijaya Bank 53.87 BOB 53.81 Dena Bank 51.19
    • 11. Technology Platform
      • BFSI  L argest Vertical driving software revenues
      • CBS  FINACLE
      • Integration of Database
      10/08/2010 Source: Nasscom-McKinsey study
    • 12. Cultural Issues & HR Practices 10/08/2010
    • 13. Synergies
      • Cost and Revenue Synergies
      • Reducing overlap in operations
      • Profit Per Employee of PSBs v/s Private
      10/08/2010
    • 14. Bank Overview
      • Bank Of India
      • Govt. Of India holding at 64.47%
      • Dena Bank
      • Govt. Of India holding at 51.19%
      10/08/2010
    • 15. Bank Overview
      • Bank Of India
      • Dena Bank
      10/08/2010
    • 16. Bank Overview
      • Bank Of India
      • Dena Bank
      10/08/2010
    • 17. Bank Overview
      • Bank Of India
      • Dena Bank
      10/08/2010
    • 18. Bank Overview
      • Bank Of India
      • Dena Bank
      10/08/2010
    • 19. Valuation
      • Income Approach -Discounted Cash Flow
      • Projection of Earnings for a period of 4 years
      • Discounted at respective WACC and arrived at Final Firm Value
      10/08/2010
    • 20. Assumptions of the Valuation
      • Due-Diligence Report positive to the merger
      • Deposits  16% y-o-y, Advances  17% y-o-y
      • Banking Industry to grow at 5% FY2014 onwards
      • Zero interbank transactions between BOI and Dena Bank (for consolidated accounts)
      • Equity infusion of Rs.600 Cr. in FY2011
      10/08/2010 Source: Crisil Research & Capital Infoline
    • 21. Methodology
      • Trend Analysis used for projections
      • Cost of Equity calculated as per CAPM model
      • Cost of Debt considered after the Tax Shield Effect
      • DCF Model for discounting FCFF
      • Constant Growth Model For Continuity Value
      10/08/2010
    • 22. Projection – Dena Bank 10/08/2010
    • 23. Projection – Dena Bank 10/08/2010
    • 24. Projection - Bank Of India 10/08/2010
    • 25. Projection - Bank Of India 10/08/2010
    • 26. Valuation- Dena Bank
      • FCFF:
      10/08/2010
    • 27. Valuation- Dena Bank
      • WACC:
      10/08/2010
    • 28. Valuation- Dena Bank
      • DCF:
      • FINAL VALUE:
      10/08/2010 DCF as on 2010 863+2063+ 1661+15364 = 19954.67
    • 29. Valuation-Bank Of India
      • FCFF:
      10/08/2010
    • 30. Valuation-Bank Of India
      • WACC:
      10/08/2010
    • 31. Valuation-Bank Of India
      • DCF:
      • FINAL VALUE:
      10/08/2010 DCF as on 2010 16596+9019 +8962+94798 = 129, 377.06
    • 32. Proposed Method Of Payment
      • Equity Swap Ratio:
      • Value of Deal  Rs. 18,390.77 Cr.
      • Our Bank to issue fresh equity shares of Rs. 90.48 Cr.
      10/08/2010
    • 33. Consolidated Balance Sheet 10/08/2010
    • 34. 10/08/2010
    • 35. Branch Network Advantage
      • Bank Of India  PAN India Presence
      • Dena Bank  Strong in the western part of India
      10/08/2010
    • 36. 10/08/2010 Rural Reach Bank Of India Dena Bank Lead Bank Responsibility
      • In 48 districts spread over Five states
      • In 13 districts spread over Three states
      Regional Rural Bank
      • Sponsored 5 RRBs
      • 1018 branches in 46 districts
      • Sponsored 2 RRBs
      • 249 branches in 10 districts
    • 37. Technology 10/08/2010 Lower Management & Operational Costs Introduce New Techno-centric Products Micro ATM Facility RTGS/NEFT Enabled
    • 38. CASA
      • Dena enjoys strong CASA 35%-40%
        • Strong presence in Developed States & Rural Areas
      • BOI has a weak CASA 30%-40%
        • Low as compared to peers & also Dena Bank
      10/08/2010
    • 39. 10/08/2010 International Presence BOI-International
      • BOI
        • 17.28% of Total Business
        • 29 Branches
      • Dena Bank
        • International Expansion Plans
    • 40. Benefits 10/08/2010
    • 41. Macro Economic Impact of the Deal 10/08/2010
    • 42. 10/08/2010 Not the End…. But a New Beginning
    • 43. 10/08/2010 10/08/2010 Comparison Table Of Leading Public Sector Banks Particulars Bank of India (Post Merger) Punjab National Bank Bank of Baroda State Bank of India Branches 4,430 4997 3,148 12,496 ATM’s 1,216 3700 1,315 16,369 Employees 50,201 56,928 38,071 2,00,299 Deposits (Rs. Cr) 3,39,869 3,04,183 2,94,074 9,81,022 Advances (Rs. Cr) 2,47,050 2,27,653 2,13,543 7,70,935 Total Business (Rs. Cr) 5,86,919 5,31,836 5,07,617 17,51,957 Major PSBs In the PSB Group(%) In the Indian Banking Sector(%) SBI - 23.84 Punjab National Bank 9.85 5.28 Bank Of Baroda 9.40 5.04 Bank Of India 9.00 4.83 Dena Bank 1.96 1.05 Bank Of India  Post Merger 10.87 5.83
    • 44. Acknowledgement
      • Faculty of our College
      • BOI Personnel
      • Every individual who directly or indirectly contributed
      10/08/2010 Behind every achievement lies an unfathomable sea of gratitude to those who accentuated it, without whom it would have never come into existence…
    • 45. Bibliography 10/08/2010
    • 46. 10/08/2010 Report Thank You ….

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