ASSIGNMENT ON EFFECT OF MERGER ON CENTURION BANK OF PUNJAB

Submitted To: Miss Monika Hanspal

Submitted By: Kamaljeet Singh 10-130

Centurion Bank of Punjab

1. Centurion bank of Punjab is a new generation private bank offering a wide spectrum of retail, SME and corporate banking products and services. 2. It has been among the earliest banks to offer a technology enabled customer interface that provides easy access and superior customer service. 3. Centurion Bank of Punjab has a nationwide reach through its network of 241 branches and 389 ATMs 4. The bank aims to serve all the banking and financial needs of its 5. customers through multiple delivery channels, each of which is supported by state of the art technology architecture. 6. Centurion Bank of Punjab was formed by the merger of Centurion Bank and Bank of Punjab, both of which had strong retail franchises in their respective markets. 7. Centurion Bank had a well managed and growing retail assets business, including leadership positions in two wheeler loans and commercial vehicles loans and a strong capital base. 8. Bank of Punjab brings with it a strong retail deposit customer base in North India in addition to a sizable SME and agriculture portfolio. 9. The shares of the bank are listed on the major stock exchanges in India and also on the Luxembourg Stock exchange. Among centurion bank of Punjabs greatest strengths is the fact that it is a professionally managed bank with a globally experienced and capable management team. 10. The day to day operations of the bank are looked by Mr. Shilnder bhandari, managing Director & CEO, assisted by a senior management team, under the overall supervision and control of the Board of directors. 11.The book value of the bank would also go up to around Rs 300 crores. The higher book value should help the combine entity to mobilize funds at lower rate. 12.The combined bank will be full service commercial bank with a strong presence in the Retail, SME and Agricultural segments.

Share holding pattern of Centurion Bank of Punjab

1. After the merger shareholding of Bank of Punjab (BOP) promotes will shrink to 5%.The family of Darshanjit Singh which promoted Bop currently holds 15.62% while associates hold another 11.40% the promoter stake will now fall down to around 5% ad for associate that would be 7-8%. 2. The major shareholder of the centurion bank, bank of Muscats stake will fall to 20.5% from 25.91%, Keppels stake will be at 9% from current level of 11.33% and Rana Talwars capital will have a stake of 4.4% as against 5.61%. 3. The promoters of BoP and major stakeholders of centurion bank will have a combine stake of around 42% in the merged entity- centurion bank of Punjab. 4. The costs of deposit of Bop were lower than Centurion; While Centurion had a net interest margin of around 5.8%. The net interest margin of the merged entity will be at 4.8%. 5. The combined entity will have adequate capital of 16.1% to provide for its growth plans. 6. Centurion banks capital adequacy on a standalone basis stood at 23.1% while Bank of Punjab figure stood at 9.21%. 7. The performance net worth of combined entity as at march 2005 stood at Rs. 696 crores with centurions net worth at Rs. 511 crore and Bank of Punjabs net worth at Rs. 181 crore, and combine entity( centurion Bank of Punjab) will have total asset 9395 crore, deposit 7837 crore and operating profit 43 crore. 8. The merged entity will have a paid up share capital of Rs. 130 cr and a net worth of Rs. 696 cr. 9. The merged entity will have 235 Branches and extension counters, 382 ATMs and 2.2 million customers.

MERGER POSITION
1. Private Banks is taking to the consolidation route in a big way. Bank of Punjab (BOP) and Centurion Banks (CB) have been merged to form Centurion Bank of Punjab (CBP). 2. RBI approved merger of Centurion Bank and Bank of Punjab effective from October 1, 2005. 3. The merger is at swap ratio 9:4 and the combined bank is called Centurion bank of Punjab. 4. The merger of the banks will have a presence of 240 branches and extension counters, 386 ATMs, about 2.2 million customers. As on March 2005, the net worth of the combined entity is Rs 696 crore and the capital adequacy ratio is 16.1% in the private sector, nearly 30 banks are operating. 5. The top five control nearly 65% of the assets. Most of these private sector banks are profitable and have adequate capital and have the 6. technology edge. Due to intensifying competition, access to low cost deposits is critical for growth. Therefore, size and geographical reach becomes the key for smaller banks. 7. The choice before smaller private banks is to merge and form bigger and viable entities or merge into a big private sector bank. The proposed merger of bank of Punjab andCenturion Bank is sure to encourage other private sector banks to go for the M&A road for consolidation. 8. The merger of Centurion bank and Bank of Punjab, both of which had strong retail franchises in their respective markets, formed centurion bank of Punjab. Centurion bank had a well managed and growing retail assets business, including leadership positions in 2 wheeler loans and commercial vehicle loans, and a strong capital base. 9. Bank of Punjab brings with it a strong retail deposit customer base in North India in addition to a sizeable SME and agricultural portfolio. The shares of the bank are listed on the major stock exchanges in India and also on the Luxembourg stock exchange. Bank of Punjab has net non-performing assets of around Rs 110. The merger will give us scale geographical reach and entry into new products segments said the official.

10.Bank of Punjab is strong in small and medium enterprises (ME) business in the north, with good retail assets and an agriculture portfolio as well as deposit franchisee Centurion Bank has a capital, ability to generate retail assets, risk management systems and good treasury division. Market players except the swap ratio 2:1, said sourcesFor very two stocks of Centurion bank, a shareholder will get one stock of Bank of Punjab. 11. The merged entity will have a asset base of Rs.10, 000 crore, said a senior bank official. The depository base of entity will be around Rs. 7165.67 crore and advances will be around Rs. 3909.87 crore. The organization structure for the combined bank is in place and the grades and incentives across the organization have largely been realigned. 12.Centurion bank of Punjab said in a statement. The operations of the bank have been integrated across the entire network.

13.A decision has been taken on a common system for the banks and a phased migration has been planned to ensure minimum disruption of customer service and operation across the bank Centurion Bank of Punjab Said.

THE KEY FINANCIAL PARAMETERS OF THE TWO ENTITIES LOOK AS FOLLOWS AS ON 31 MARCH 2005
Rs. In Corers Centurion BOP Total a. Capital Reserve 184.26 511.44 695.70 b. Total assets 4848.28 4490.29 9338.53 c. Deposits 4306.62 3530.38 7837 d. Advances 2416.99 2193.95 4610.94 e. Operating Profit before provisions & contingencies 2. 19.48 23.16 42.64 a. Business 6723.61 5724.33 12447.94 b. Interest margin 134.92 177.88 312.80 c. Capital adequacy 9.23 21.42 30.65 d. Banking offices 136 99 235 e. Market capitalization 315 1477.97 1792.97

finacial posiotion of centurion bank of punjab

20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2003 2004 2005 2006 2007 finacial posiotion of centurion bank of punjab

Trend: Increasing
Financial position of centurion bank of Punjab was going better and better after merger in 2005. So we can say that this merger is in favour of centurion bank of Punjab.