Despite weaker Dena Bank, Bank of Baroda has minimal impact on NPAs post-merger, says CEO PS Jayakumar

Mumbai: Bank of Baroda on Monday said the amalgamation of Dena Bank and Vijaya Bank from Monday is unlikely to bring in much changes in the financials of the combined entity, including non-performing assets. The three-way merger, the first in the country, makes BoB the third-largest lender after State Bank of India and HDFC Bank, and the second-largest among state-run banks, with a combined business of Rs 15 lakh crore, of which deposits are Rs 8.75 lakh crore and advances are at  Rs 6.25 lakh crore.

“Looking at capital adequacy ratio for December 2018 quarter, the numbers don’t change magically as the pluses of one (Vijaya) are offsetting the minuses of the other (Dena). So net numbers of the combined entity is close to where BoB has been in terms of core capital,” managing director and chief executive PS Jayakumar told PTI in an interaction.

He said as of the December quarter, CET1 of BoB was 8.65 percent and on a consolidated level it would be 8.67 percent. Of this, on a standalone basis, BoB’s tier 1 capital stood at 9.86 percent and at the combined level it would also be 9.86 percent. As far as net NPA is concerned, for BoB it was 4.26 percent in the December quarter. Given the fact that Dena has much higher NPAs, the new NPA numbers for the combined entity is marginally higher at 4.80 percent, he said. “Yes, net NPA has increased but it is not a blow-up by any means, and at 4.8 percent this is something that we can address over the next two quarters,” Jayakumar said. [caption id=“attachment_6370131” align=“alignleft” width=“380”]  Representative image. Reuters[/caption] He said in absolute terms, net NPA of BoB stood at around Rs 19,000 crore and this would move to Rs 30,000 crore on a combined basis and he hopes to see improvement in the combined numbers from the first quarter of FY20. “We are at the end phase of NPA-related challenges. In general, everybody is expecting the recovery cycle to begin from now on. I’d think that positive movement should start from the March quarter itself,” he said. Ahead of the merger, government had infused Rs 5,042 crore capital into the bank, and he said he will not require any immediate capital. From now on, all customers of Dena Bank, which is under prompt corrective action of the RBI, will have renewed access to credit facilities immediately, he said, adding credit growth of BoB and Vijay have been at 15-18 percent and it will continue to grow at the same pace. Jayakumar said plans are also afoot to build on the strengths of individual banks and their gain from their synergies and scale up operations by deepening relationships with a wider customer base. By the end of this month, BoB will bring in interoperability of the key banking services at all the 9,500 branches of the combined entities which would now be known as BoB also the 13,400 ATMs. He said IT integration is expected to be completed over the next 12-18 months when accounts of all three banks will be migrated to single core-banking system. BoB is now on the version 10 of Finnacle, while Dena and Vijaya are on a different versions of Finnacle. Ruling out a massive branch mergers, Jayakumar said in rural areas the overlaps are very thin, but in around 1,000 urban centres, the bank will be looking at relocating branches to areas. Similarly, he also ruled out retrenchment as he does not see redundancy in extra-staff as there are many sectors where BoB is not present and would now focus on those areas. The combined entity will have a workforce of over 85,000. “Our total number of employees is not going to shrink. We will, in fact, be in an expansionary mode as we need different kind of talents such as a larger outbound sales force, more competencies in analytics and artificial intelligence,” he said, adding so there is not plan on the table to bring in a voluntary retirement scheme. Amalgamation of Dena and Vijaya with BoB is the second merger during the past five years. The State Bank had merged five of its associate banks—that of Patiala, Bikaner & Jaipur, Mysore, Travancore and Hyderabad as also the Bhartiya Mahila—in April 2017, making SBI the 48th largest lender in the world with a balance sheet of $500 billion. The BoB counter closed 3.2 percent up at Rs 132.85 on the BSE while the benchmark Sensex rallied 0.51 percent to close at a near-life time high of 38,871.87.