Question

In: Finance

Select one of the recent banking merger and evaluate

Select one of the recent banking merger and evaluate

Solutions

Expert Solution

One of the recent banking mergers could be from India where State Bank of India was merged with subsidiaries which were State Bank of Bikaner and Jaipur and other state banks to form sole entity that was State Bank of India.

All the subsidiaries of State Bank of India where highly stressed quality loan banks, which were loaded up with high level of NPA and these types of loans were to be written off into a future period of time so the Government of India has introduced a plan in order to save the State Banks by merging it with the main bank but it did not lead to what was earlier expected of the State Bank of India.

After the merger of State Bank of India did show a good performance but after all those bad loans where factored into, the share price of State Bank of India has crashed dramatically from 372 to lows of 166, So we can say that these mergers did not work because it was merger of two entities which does not offer significant Synergy to each other.


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