ICICI may bid for United Western

Board meets today to decide on expression of interest.

ICICI Bank is leading the race for taking over United Western Bank, which was put under a moratorium by the Reserve Bank of India on Saturday.

ICICI Bank said its board would meet tomorrow 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 Bank with ICICI Bank," it said in a statement today.

If the bank takes over United Western Bank, it will be its second major acquisition, having bought the Bank of Madura a few years ago, which established its presence in south India.

The central bank had yesterday placed United Western Bank under a moratorium till December 1 to protect its depositors, saying the aim was to merge it with a stronger bank.

There are other suitors for United Western Bank as well. While Corporation Bank is understood to have informally sounded out the RBI in this regard, Canara Bank could do so shortly. However, sources close to the development said Canara Bank was yet to take a final decision on the proposal.

Sicom, a Maharashtra government undertaking, is also interested in taking over United Western Bank, in which it already holds a stake.

Executives of Union Bank of India and Bank of India, however, did not express much interest in United Western Bank, as it would not provide them any geographical advantage. In terms of capital, in fact, it would be a strain on them since both had to raise capital for meeting post-Basel II requirements, they added.

Although United Western Bank was struggling financially, with its bad loan ratio at 5.66 per cent, compared with its peers' 1.97 per cent, it had the right infrastructure "" 230 branches in nine states "" to power growth for ICICI Bank, analysts said.

Also, its reach in western India could help ICICI Bank access funds at lower costs in small towns than in cities where it is strong.

The RBI placed United Western Bank under a moratorium after it reported a net loss of Rs 6.08 crore for the quarter ended June 2006, a negative ( -0.3 per cent ) capital adequacy ratio, and net non-performing assets of 6.16 per cent. It had been under monthly monitoring since June 2001.

The RBI said "inefficient management" had allowed the bank's capital to risk weighted assets ratio (CRAR) to turn negative, and bad loans to rise much above the levels of its peers.

The RBI has in the past placed weak banks under moratoriums before finding the right partner to merge them with. It merged Global Trust Bank with Oriental Bank of Commerce and the Nedungadi Bank with Punjab National Bank. A more recent case is of Ganesh Bank of Kurundwad Ltd being merged with Federal Bank.

This time, too, the central bank is in favour of a PSU bank acquiring United Western Bank.

"Generally, a preference is given to public sector banks (for merger)," RBI officials told reporters on Saturday.

The 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 it a suitable partner.