The government’s plan to merge ten public sector banks has led to a massive eradication in the stock prices of these banks. The shares of these ten PSU banks witnessed a sell-off in the past six months since the announcement, eroding almost half of their shareholders' wealth.
Six months ago on August 30, 2019, Finance Minister Nirmala Sitharaman announced a mega consolidation of 10 state-run lenders into 4 bigger banks.
According to the plan, Punjab National Bank, Oriental Bank of Commerce and United Bank will be merged to form the country's second-largest PSU bank. State Bank of India (SBI) will still hold the spot of the largest lender in the country.
Canara Bank will be merged with Syndicate Bank to become the third-largest public sector lender.
Further, Union Bank of India, Andhra Bank and Corporation Bank will be merged to become the fifth-largest PSU bank. After the merger of Indian Bank and Allahabad Bank, the new entity will be the seventh-largest state-run lender.
Since the announcement of the merger, Nifty PSU bank index has plunged more than over 21 percent.
Among the shares of banks to be merged, PNB fell more than 31 percent, Oriental Bank of Commerce declined the most 99 percent and United Bank plunged 34 percent.
Canara Bank and Syndicate Bank have eroded shareholders’ wealth by more than 36 percent and 41 percent, respectively, since August 30, 2019.
Shares of Union Bank of India, Andhra Bank declined more than 34 percent and 35 percent, respectively. Corporation Bank shares fell the least by 13.52 percent since the merger announcement.
The shareholders of India Bank and Allahabad Bank have lost nearly 64 percent and 69 percent, respectively, in the past six months.
Meanwhile, except for Corporation Bank, shares of all other PSU banks mentioned above hit their fresh 52-week low on February 28.
The deadline for the merger is set on April 1, 2020. On Wednesday, Sitharaman said that the proposed merger of public sector banks is underway and will meet the implementation date of 1 April.
“We are going as per schedule on that. There is no uncertainty," Sitharaman added.
Earlier in April 2019, Bank of Baroda became the country’s third-largest lender after its merger with Dena and Vijaya Bank.
At present, there are 18 public sector banks as compared to 27 in 2017. There will be only 12 public sector lenders after the mergers.
First Published: Feb 28, 2020 3:09 PM IST
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
