The board of public sector lender Punjab National Bank (PNB) is meeting today to consider the amalgamation of the Oriental Bank of Commerce (OBC) and United Bank of India into PNB. Last week, the government had announced the series of mergers involving 10 state-owned banks, a move which will reduce the number of state-run banks to 12 from 27 in 2017. Under this arrangement, Oriental Bank of Commerce (OBC) and United Bank would be merged with New Delhi-based Punjab National Bank to create India's second largest lender after State Bank of India.
The combined entity of PNB, OBC and United Bank will have a size of about ₹18 lakh crore, with PNB being the anchor bank.
The board of PNB will also consider today capital infusion up to ₹18,000 crore by Government of India by way of preferential issue of equity share and fixing date of extra ordinary general meeting (EGM) for obtaining shareholders' approval in this regard.
Meanwhile, United Bank has informed stock exchanges that its board will not be deliberating on the amalgamation with PNB on September 6, 2019 and will discuss the matter on a later date.
Meanwhile, global rating agency Moody's on Wednesday upgraded the outlook on Punjab National Bank (PNB), which will merge OBC and United Bank of India with itself, to 'positive' from 'stable'.
The affirmation of PNB's ratings with a positive outlook reflects Moody's view that the bank's baseline credit assessments will likely improve after the capital infusion from the government, and that its financial metrics will gradually improve, it said.
After the merger, PNB will become the second-largest public sector bank (PSB) in India with a deposit market share of 8%, compared to its standalone market share of 5.2 per cent as of March 2019.
Moody's, however, added that it could lower PNB's BCA and ratings or change the rating outlook to stable if its asset quality, profitability and capital deteriorate on a standalone basis or as a result of the merger. (With Agency Inputs)