SBI, Associate banks gain as Cabinet nod for merger

Shares of State Bank of India (SBI) and its three listed associate banks State Bank of Mysore (SBM), State Bank of Bikaner & Jaipur (SBBJ) and State Bank of Travancore (SBT) rallied by up to 13% in intra-day trade after the Cabinet approves merger of SBI with five subsidiaries.

Among the individual stocks, SBM has rallied 13% to Rs 638, while SBBJ and SBT surged 11% each at Rs 796 and Rs 619, respectively, on the BSE in intra-day trade. Of these SBJJ hit a record high, while SBT touched 52-week high on the BSE.

At 10:16 am; these three banks were trading higher in the range of 4% to 5% as compared to 0.05% rise in the S&P BSE Sensex. SBI was up 1% at Rs 271, after hitting an intra-day high of Rs 277 on the BSE.

“The Finance Minister of India, in a press briefing earlier on February 15, 2017 has announced that the Cabinet has approved the proposal for merger of State Bank of Bikaner & Jaipur (SBBJ), State Bank of Mysore (SBM), State Bank of Travancore (SBT), State Bank of Patiala (SBP) and State Bank of Hyderabad (SBH) with State Bank of India,” SBI said in a BSE filing.

The board of SBI in August last year approved the share swap ratios for the merger of five associate banks with itself. SBI will issue 28 shares of Rs 1 each for 10 shares of Rs 10 each for the SBBJ, and 22 shares for 10 shares of the SBT. Likewise, shareholders of SBM will also get 22 shares in SBI for every 10 shares held by them in SBM.

“The merger of associate banks may impact cost metrics and stress assets ratio transiently, the overall profitability profile of the consol entity is unlikely to get materially impacted in the longer term,” analysts at IIFL Wealth & Asset Management said in SBI Q3 results update and rate the stock as Accumulate with 12?month price target of Rs 306.

Securities and Exchange Board of India ( SEBI )