Oriental Bank takeover sees staff exodus at GTB

Following the takeover of private sector Global Trust Bank (GTB) by state-run Oriental Bank of Commerce (OBC), about 367 employees from the erstwhile GTB have left the organisation. OBC was asked to take over the sick private sector player in August 2004.

National Institute of Bank Management is preparing a report to realign the salary structure of GTB, said OBC in its red herring prospectus filed with the Securities Exchange Board of India (Sebi).

In comparison with OBC, GTB employees enjoy a much higher take home particularly at the senior level.

The realignment of remuneration is expected to take place before the end of 2005. OBC has stated in the prospectus that it is not certain about the continuity of the erstwhile GTB employees in the coming months.

OBC has stated that it expects the amalgamation to adversely affect its financial results for the remainder of fiscal 2005. In addition, OBC may be further affected in the future, if there are any further weaknesses or additional non-performing assets and contingent liabilities from the acquisition of GTB.

The auditors of OBC have subjected the assets and liabilities of erstwhile GTB to a limited review.

But the auditors may discover further weaknesses in the erstwhile GTB and its internal controls and systems or make further accounting adjustments to OBC's financial statements as a result of a full audit, pointed out the prospectus.

OBC's gross non-performing assets were Rs 1,213 crore, representing 5.89 per cent of its gross advances as of March 31, 2004, which jumped to Rs 2,564 crore, representing 10.44 per cent of our gross advances as of December 31, 2004.

Upon amalgamation, OBC initiated several measures to address some of its immediate financial problems.

It repaid Rs 900 crore of high cost deposits, sanctioned Rs 1,157 crore of new advances at old GTB branches, rationalisation of premises owned and leased by GTB, valuation of assets of GTB on marked to market basis, management of its non-performing assets and empowerment of its branches to conduct all types of combined business and cross-selling.