South Indian Bank sees buyout or merger in three years

South Indian Bank (SIB) has set a three-year deadline to acquire or merge with another private bank.

"At SIB we intend to initiate the process of M&A next fiscal and the target is to complete the process within the next three years "" 2008," explained A Setumadhavan, chairman and chief executive officer, SIB.

He said the bank's board of directors has already discussed the issue, though unofficially. The real process and official discussions would be initiated after March 2005.

"We had a brainstorming session at the board level and emerged with the view that we need to merge with another bank. Shortlisting, duediligence, appointment of merchant banker, advisor to the process would be initiated after the board takes in principle decision," Setumadhavan said.

The chairman also said that SIB was not ruling out another public issue next year for funding its capital requirement. Its capital adequacy ratio stands at 13 per cent which is likely to touch 12.5 by March 2005.

"We hope to double our networth to Rs 1,000 crore and touch the Rs 25,000 crore business level by 2008. The number of branches on the other hand was also expected to rise to 500, from 418 at present," he said. "This will also enhance our presence to as many as 20 states from 15 as of now."

Talking about inorganic growth, Setumadhavan said, "We would look for banks that have technological synergy with SIB. This was necessary for better networking, that would allow our systems which has enabled the core banking system, to seamlessly merge with their systems. This would be the first priority at SIB," he added.

"Other considerations for merger at SIB would be areas where we do not have a wider presence like the northern and the eastern region," he said.

Setumadhavan however clarified that the banks decision to merge was not to be Basel II compliant. "Our targets would not require us to get merger, but the idea is to create a bigger presence and a country wide network in conjunction with another private entity which would provide us better economies and reach," Setumadhavan said.

Talking about current business levels, Setumadhavan said SIB has targeted a Rs 15,500 crore total business in 2004-05, where advances would be around Rs 9,500 crore. In the first half incremental credit outflow was to the tune of Rs 400 crore.