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Bank of Rajasthan to be acquired by ICICI

Tuesday, May 18, 2010

India’s second largest Private sector Bank – ICICI again in the queue of acquiring other banks. The Bank will acquire Bank of Rajasthan. It would be the 3rd acquisition by ICICI bank in the last decade.

Chanda Kochhar who is the ICICI Bank MD & CEO talks to ET, “We have reached an indicative pricing with the promoters on a swap ratio of 25:118. (A BoR shareholder will receive 25 ICICI shares for every 118 BoR shares held.) This is, however, subject to due diligence. Our understanding of the strategic value is that it would have taken us three years to build the current account and savings account relationships. Also, the deal prices the market capitalisation per branch in the range of around Rs 6.5 crore, which is similar to other old private sector banks.”

Further, an online news portal about economy and business writes, “The indicative price of Rs 188 according to the share swap would be a steep jump compared with the current market price. The ICICI Bank scrip on Tuesday closed at Rs 889.35 on the Bombay Stock Exchange, down by 1.45% while the BoR scrip rose sharply by 19.95% to Rs 99.5. The current market capitalisation of the bank is around Rs 1,604 crore and a price of Rs 188 would value BoR at Rs 3,032 crore.

Given ICICI Bank’s market capitalisation of Rs 99,125 crore, the bank will have to dilute its equity by less than 3%. ICICI Bank will propose a share-swap transaction with BoR.”

In the analysis of bank branches the news portal writes, “BoR currently has around 466 branches, of which around 280 are in Rajasthan. The move would also offer ICICI Bank a decent network across north India in states like Madhya Pradesh, Haryana, Uttar Pradesh and even Delhi where Bank of Rajasthan has over 20 branches.

ICICI Bank currently has around 2,000 branches of its own. The bank, because of its earlier acquisitions of Bank of Madura in 2000-01 and Sangli Bank in 2006-07, has a good network of branches in the south and west.”

In the analysis of the acquisition the news portal writes, “Interestingly, before the economic downturn, ICICI had considered the possibility of taking over BoR. But the deal fell through as ICICI was unwilling to fork out the money Mr Tayal had asked for. ICICI currently has a high capital adequacy ratio of 19.41% while BoR has a ratio of 11.71% as on December 31.”

Merge of Bank of Rajasthan in ICICI will be the biggest acquisition of capital in the recent history. It is the indication of power and strength of banking capital. It will be known as the biggest acquisition of banking sector. The acquisition will make capitalist development very clear in India. Growth in banking sector can be seen with the hikes in deposit rates of Dhanalakshmi bank.
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Dhanalakshmi Bank Hikes 25 Basis Points Term Deposit Rates

Friday, May 14, 2010

Recently, the most popular Kerala-based bank – Dhanalakshmi announced a 25 basis points increase on its domestic term deposit rates. The term is effective now across all maturities.

In a press release it is said that the new rate are applicable for all domestic term deposits below and including Rs 1 crore across all tenures., an online news portal about economy and business, quotes the release, “Deposit of up to Rs 1 crore will be offered 6.5 per cent for one-year maturity. For deposits from ranging from 366 days to two years, 7.25 per cent, above two years up to five year maturities, the bank will offer 7.50 per cent and above five years up to 10 years, 7.75 per cent.”

Further the release says, “The bank will offer a special rate of 7.75 per cent for 400 days term for deposits up to Rs 50 lakh. It has also waived off pre-payment penalty in respect of all deposit schemes that offer the sweep in sweep out facility as a product feature.”

In the conclusion, the news portal writes, “It has also announced increase in the period of term under its short term, high value deposit schemes from 15 days and 30 days to 46 days and 91 days respectively.”

It is the very good news for investors. However, in the last month Reserve Bank of India increases the short-term lending and borrowing rates and the cash reserve ratio (CRR) by 25 basis points. It was the second time when RBI had hiked key rates and repo rates.

Customers of Dhanalakshmi bank will be able to take the more benefit being a long time maturity holders. The bank gives the maximum returns on the long period maturity plans. The big investors have also the big returns in this plan. The bank has tried to take some more risk in the current market.
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