Union Bank of India chairman and managing director V Leeladhar today said there was no synergy in effecting a reverse merger of IDBI with his bank. While stating that that the bank, which is 100 per cent owned by the central government, was not approached by the institution for the merger, he added that it was up to the Centre to take a decision on this issue.
Leeladhar pointed out that the merger would lead to an asset liability mismatch as the bank had short-term deposits (liabilities), while the IDBI financed long-term assets.
"Over the last three we have been able to iron out gaps in the maturities of our assets and liabilities and the merger will vitiate the mismatch," Leeladhar explained.
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The combined exposure to corporates and industry sectors coupled with the high level of non-performing assets of IDBI was another reason for the merger not being advisable.
It (the merger) will benefit neither the bank nor the IDBI as both do not have a foreign presence and technology integration were the other factors against an amalgamation, the CMD said.
Moreover, while the Union Bank had a network of 2,023 branches, the IDBI had presence only in state capitals, he added.
On initial public offer (IPO) of Union Bank, the CMD said, the current market conditions did not permit it to tap the markets. The bank, which has a share capital of Rs 338 crore, was planning to raise Rs 150 crore and in the process return Rs 88 crore to the government.
The bank's tier-I capital as on September 30 stands at 6.19 per cent, while the tier-II capital is 4.67 per cent. The bank has raised Rs 600 crore by way of tier-II capital in the last few years and expects to plough back Rs 100 crore from its profits into the reserves so that it can raise tier-II capital towards the end of the financial year.
Meanwhile, the bank has, for the first time, syndicated a one year Rs 400 crore loan in association with the Standard Chartered Grindlays Bank for the Indian Oil Corporation. Though the issue is to close on November 7 it has already been oversubscribed. Interest rate on this loan is linked to the 90 day commercial paper (CP) and is re-set at quarterly intervals depending on the CP rates obtaining at the end of every quarter.
...net up 9% to Rs 37 crore
Bouyed by a 92.41 per cent jump in non-interest income, the Union Bank of India has posted a 9.37 per cent rise in net profit to Rs 37.32 crore for the quarter ended September 30,2001, against Rs 34.12 crore in the corresponding period in the previous year. Other income has increased to Rs 121.80 crore compared with Rs 63.30 crore in the previous year.
The net profit for the half year ended September 30 has shown a rise of 34.46 per cent to Rs 100 crore compared to Rs 74.63 crore in the corresponding period in 2000-01.