The merger of five associate banks with State Bank of India (SBI) will result in the capital adequacy ratio of the merged entity falling by about 54 basis points (bps) to 13.19% from 13.73%, chairman Arundhati Bhattacharya said on Thursday. “We will still be very close to 14% and, therefore, it is not a really major worry for us,” she said, explaining that 79 bps of capital from the fourth-quarter infusion of funds by the government and profit had not been taken into account.
The new entity’s gross non-performing asset (NPA) ratio will rise by 147 bps to 8.7%. Bhattacharya said the gross NPA ratio would not go up too much as the bank has been working to ensure that provisioning levels of the associate banks were raised to SBI’s standards.“By the time they come in, all of the provisions that they needed to have made will be made, to the extent possible,” the chairman said.
Consolidated deposits of the merged entity will be R26,04,473 crore while gross advances will be R18,76,727 crore. The consolidated balance sheet size will be R32,18,498 crore. Bhattacharya added that the real estate assets of the associates have already been revalued and accounted for in their books after taking the stipulated haircut.
Addressing concerns about wage expenses, Bhattacharya said, “All of the associate bank people will be offered the wage package that our people have for the relevant grades. It’s up to them to either accept that or retain whatever package they have right now. They actually have a choice to do that. So I do not think there will be any wage-related changes.”
The bank expects the merger to lead to synergies in terms of treasury operations, the reorganisation of some head offices and the consequent redeployment of some administrative staff in direct operations. For large advances, where the associates are part of consortia, their limits will get taken over by SBI and people managing those accounts would also be released for looking after other businesses, Bhattacharya said. Other functions related to account management, such as audit and information technology, will also become consolidated. Bhattacharya refused to put a value on these synergies and said that it there will be more clarity on this once the merger is completed.
Anshula Kant, chief financial officer at SBI, had earlier said that the terms of the merger are such that for every 10 shares of State Bank of Bikaner and Jaipur, shareholders will get 28 equity shares of SBI. For every 10 shares State Bank of Mysore, shareholders will get 22 shares of SBI and for every 10 shares of State Bank of Travancore, they will get 22 shares of SBI. The other two associates, State Bank of Hyderabad and State Bank of Patiala, are fully-owned, unlisted subsidiaries of SBI.