P.S. Jayakumar , MD & CEO, Bank of Baroda, the largest among the three banks that are being merged, discusses the rational for the move.
What are the synergies that have led to select these three banks for the merger?
The way to look at it is more long-term than short-term. I think the opportunity for the combined bank is the strength and distribution in branches ... in the locations. So, we are seeing increase in presence in Gujarat, Maharashtra and the southern corridor while maintaining our position with respect to Uttar Pradesh and Rajasthan.
Vijaya Bank and Dena Bank’s loan portfolios are more granular in nature. So, the combined portfolio will be more diversified in nature, both in terms of geography and granularity.
Some of the numbers might be interesting. In Gujarat, for example, BoB has 1,007 branches. The combined entity will have 1,744. In Delhi, the NCR corridor, we have 131 branches. The combined entity will have 255.
If you take Karnataka, we are 121 on a standalone basis and the combined entity will have 796 branches. In Maharashtra, we are 505. And, the consolidated number will be 1,009 consolidated. In Andhra Pradesh, we have 125 branches which will move to 271. In Telangana, we have 78 which will go up too 192. In Kerala, we have 110, which will go up to 261.
In many of these States, it would be logical for BoB to grow the number of branches. So from that perspective, we are gaining market share in those locations where we would very much like to grow. So, the combined entity will be well placed with respect to growth market.
Do you see some consolidation of branches in Gujarat, Maharashtra?
The first stage would be to get the board approval. Then there is a process related to merger. Then there is technology and human resource issues that will be addressed. So, branch shutting down will not be there in the first wave. We will do it thoughtfully.
What process will be followed for the merger?
The board meeting will be in a very short order of time, not this week but sometime next week. The first step is to get the board approval. The next step is to appoint the team of investment bankers, accounting firms to arrive at the stock swap ratio. Then the scheme of amalgamation will be drafted which will then be placed to Parliament. And then the residual process to be completed for the merger to take place.
When do you think the merger process will be completed?
It will take four-to-six months.
Do you think BoB retain its identity post merger?
There are a numbers of questions which are there and which need to be thoughtfully dwelt upon. We have not come to that stage as yet. But, in general, we have seen some successful example. Although Natwest is owned by RBS, Natwest, as a brand, continues to remain in existence. Therefore, at this particular point, there is no reason to believe that the brand will be get diminishes or lost.
What will be your message to customers?
The message from all three of us is that it will be a bank of greater strength, better choice of products for customers, more preferences in terms of places to bank.
How are you planning to address HR issues?
There is no such thing as enough communication. We need to communicate, communicate and communicate. If we look at the data for Bank of Baroda, we relatively have lesser number of people than we ought to have. The second thing is that we are going through a phase where a fair amount of retirement is happening given the particular age structure which is a common to all the three entities. Given all of these factors, I think there is a need for more people and more growth. So, I think there should not be any concern among employees with respect to retrenchment.
The second thing is there is more options for people to work in terms of geographic location or segments of products because of a larger institution. Bank of Baroda also brings the opportunity to work in many overseas market which is not available currently to the employees of Vijaya Bank and Dena Bank.
Also, we are taking various other initiatives such as analytics, technology, business processing etc. So, I think, there is greater opportunity for all the employees.
Will the merged entity need more capital?
Any call for capital, whether we do it for ourselves or for the combined entity, has to be thought through and defended as well.
The scheme of things will involve creation of a new financial plan for the combined entity for a three-year period and then making a business case as to what kind of capital we will need. But the overall position of the government is that capital is available. But, any case for capital will have to be well presented and argued.
