BackAGM clears way for CSB takeover by Federal Bank
AGM clears way for CSB takeover by Federal Bank
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Thrissur: The unanimous appointment of five directors on the board of the Thrissur-based Catholic Syrian Bank Ltd (CSB) at its annual general meeting (AGM) on Friday appears to have cleared the decks for its possible takeover by Federal Bank Ltd, also a Kerala-based private bank, which holds a 4.99% stake in CSB.
According to S. Santhanakrishnan, a director of Federal Bank who was present at the AGM, the no-contest nomination at the AGM is an indication of “the smoother things to follow".
The two days before Friday’s AGM witnessed a flurry of activity to avoid a contest, since there were six nominations for the five board positions.
One of the candidates, Johny Chandy, withdrew from the contest late on Thursday.
All five who had filed nominations — C.F. John, Jos C. Chakko, C.K. Gopinathan, N.R. Achan, and K. Iype Peter — have been elected to CSB’s board.
John and Chakko had filed their nominations for re-election. Achan is a former chairman and chief executive of CSB and Peter is a former employee of Federal Bank.
Shares of Federal Bank closed 2.06% lower at Rs206.40 each on the Bombay Stock Exchange on Friday even as Sensex, the benchmark index of the exchange, fell 3.28% to 13,102.18. At this price, Federal Bank has a market capitalization of Rs3,528.2 crore.
Earlier, in August, Federal Bank had acquired the stake in CSB from Thailand-based businessman Surachan Chawla, who had a 38% stake in the bank. Following regulatory restrictions, he divested a portion of his stake, and must sell another 17%.
Under Reserve Bank of India’s bank ownership norms, no entity can hold more than 10% in a bank.
The new composition of the board, where at least two independent directors are inclined to see the merger of CSB with Federal Bank proceed, will mean interesting days ahead for the banking industry in Kerala, said a local banker who did not want to be named.
Federal Bank is the state’s largest bank, with 600 branches, a net worth of Rs3,919.33 crore and a net profit of Rs368.05 crore in 2007-08. It has been scouting for possible acquisitions since its rights issue last year which raised Rs2,056 crore.
CSB’s net profit last year was Rs36.56 crore. It has a net worth (sum of equity and reserves) of Rs263.62 crore.
Founded in 1920, CSB is one of the oldest banks in the state and 200 of its 360 branches are in Kerala.
People familiar with the situation who did not want to be named said the new CSB board would soon consider a proposal for merger with Federal Bank which could happen in the next 3-4 months. Earlier, Federal Bank chairman M. Venugopalan had said the bank was open to having a say in the affairs of CSB.
Rival banks, however, say a possible takeover could benefit them as the integration will not be easy.
V.A. Joseph, chairman and chief executive of South Indian Bank Ltd, another Kerala-based bank which is also on the prowl for acquisitions, said the unanimous election at CSB appears to have made things easy for Federal Bank.
“But it should be beneficial to us. Overlapping of branches, staff strength, the business size of the bank to be taken over, etc., will have to be looked at. These can make things unviable and make a bank lose its strength."
CSB’s directors, not surprisingly, are not too happy with any talk of an acquisition.
A CSB director who did not want to be named said the bank was not in such a (bad) shape as to be merged with other banks.
“It has the strength to stand independently."
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