ess Trust of India / Mumbai September 3, 2006ICICI Bank is leading the race for taking over United Western Bank, which was put under moratorium by the Reserve Bank of India (RBI) on Saturday.ICICI Bank said its board would meet tomorrow (Monday) to consider taking over the bank. "The board will meet on September 4 to consider whether an expression of interest should be submitted to the Reserve Bank of India (RBI) for amalgamation of United Western with ICICI Bank," it said in a statement today.If the bank takes over United, it would be its second major acquisition, having bought the Bank of Madura a few years ago which established its presence in Southern India. The central bank on Saturday placed United Western Bank under moratorium till December 1 to protect its depositors and said the aim was to merge the bank with a stronger one.There are other suitors as well for United. While Corporation Bank is understood to have informally sounded out RBI on its interest in taking over the bank, Canara Bank could do so shortly. However, sources close to development said Canara was yet to take a final decision on whether to put up a proposal.Executives in Union Bank of India and Bank of India, however, did not express much interest as United would not give them any geographical advantage to them. In terms of capital, it will in fact be a strain on them since both have to raise capital for meeting post Basle II requirements, they added.Although United Western is struggling financially with its bad loan ratio running at 5.66% compared with its peers' 1.97%, it has the right infrastructure - 230 branches in nine states - to fuel strong growth for ICICI Bank, analysts said. In addition, United Western's reach in Western India could help ICICI access funds at lower costs in smaller towns than in cities where it is strong.After reporting a net loss of Rs 6.08 crore for the quarter ended June 30,2006, a negative (-0.3%) capital adequacy ratio and net non performing assets of 6.16%, the RBI placed it under moratorium after putting under monthly monitoring since June 2001.While announcing the moratorium, RBI said "inefficient management" allowed its capital to risk weighted assets ratio (CRAR) to turn negative and bad loans rise much above the levels of its peers.The RBI has historically placed weak banks under moratorium before finding a right partner to merge them with. It merged Global Trust Bank with Oriental Bank of Commerce a few years back and the Nedungadi bank with Punjab National Bank. Recent moratoria and subsequent mergers include Ganesh Bank of Kurundwad, with the Federal Bank.This time also the central bank is favouring a PSU bank to acquire United Western. "Generally, preference is given to public sector banks (for merger)," RBI officials told reporters on Saturday. RBI has appointed S K Gogia and Y Radhakrishnan as its nominees on the board of the bank to assist the management committee in finding a suitable partner.PTI adds:Private sector banks appear to lead the race for amalgamating the under-moratorium United Western Bank (UWB), itself a private sector entity, with themselves, if ICICI Bank's move to consider the issue at its urgently-convened Board of Directors meeting tomorrow is any indication.ICICI Bank's board will meet tomorrow to consider if an expression of interest should be submitted to the Reserve Bank of India (RBI) for amalgamating UWB with itself.Apart from ICICI Bank, another private sector bank, the Kerala-based Federal Bank is also reportedly interested in UWB. In fact, the southern private sector banking major is reported to have been eyeing UWB much before yesterday's RBI move.For both banks, it makes sense to amalgamate the Satara-headquartered UWB with themselves. For ICICI Bank, the largest player in the Indian private sector banking space, it provides an opportunity to add a further 230 UWB branches and consolidate itself tremendously in the sector.ICICI Bank is already very strong in the western region and with the majority of UWB's branches in Maharashtra, an amalgamation will enable it to enter interior Maharashtra, especially western Maharashtra, and catapult it to a very strong position in the region.The same holds true for Federal Bank which, following a recent Supreme Court order, amalgamated the Ganesh Bank of Kurundwad, thereby expanding its footprint in Maharashtra. An amalgamation with UWB will, therefore, fit in with its strategy to consolidate itself further in the western region.
