HDFC Bank acquiring Centurion Bank of Punjab, shape of things to come ahead

If it happens, it could be indeed the largest banking sector consolidation ever in India. According to reports on CNBC-TV18 and The Economic Times, HDFC Bank is most likely to takeover Centurion Bank of Punjab and the board is scheduled to meet on February 23 for the decision.

CBoP has been among the most proactive bank when it comes to merger and acquisitions. The erstwhile Centurion Bank first acquired the lone branch of Bank of Muscat, followed up it with a merger with Bank of Punjab to strengthen its operations in north India. Then in August 2007, it acquired Lord Krishna Bank to take its tally to 394 branches all over India.

Once the deal happens, it would make HDFC Bank the seventh largest bank in terms of assets to take it past other banks such as IDBI, Union Bank and Axis Bank. The total asstes would rise to Rs.1,10,110 crore, with branch network of 1150, ATM network of 2100 and 27000 staff.

Earlier there were talks of CBoP merging with either IDFC or even ICICI Bank. But HDFC Bank has emerged as a serious favourite and there are even talks that after CBoP-HDFC Bank merger, there may be a merger of HDFC with HDFC Bank.

In terms of performance, CBoP has not been performing well operationally its costs were high and growth was low as compared to industry standards. While merging it with HDFC Bank would give it a shot in the arm, as HDFC Bank is know to be among the best Indian bank for past many years.

For HDFC Bank, the merger would give increased presence in states like Punjab, Haryana and Kerala and also increase its retail assets. It would also even out in terms of branch network and even overtake ICICI Bank in number of branches.

At what price the deal happens, could only be known later but at current market price and an all-stock deal, it could be worth over Rs.10,000 crore.

With relaxation of norms due to happen in 2009, such time of deals may happen more in Indian banking sector. And there may be many foreign banks who would be eying small prviate but tech-savvy banks such as Yes Bank, Bank of Rajasthan, Dhanalaxmi Bank and Laxmi Vilas Bank for takeover.