Thursday, July 11, 2013

Three more mergers to happen this fiscal year.

Three more merged financial institutions will start operations before the end of the current fiscal year. Nepal Rastra Bank has given the final go-ahead to the three sets of mergers between nine financial institutions.

Social Development Bank and Gulmi Bikas Bank will be merging into Global IME Bank. Likewise, merger between Prabhu Finance, Samridhdhi Bikas Bank and Baibhav Bikas Bank will form Prabhu Development Bank. Royal Merchant Banking and Finance, Api Finance and Rara Bikas Bank will also form a national level development bank following their merger.

All these three merged financial institutions are planning to publish a single balance sheet for the current fiscal year.

Global IME Bank’s merger with the two development banks was finalised in May, while the memorandum of understanding for a merger between Prabhu Finance and its two partners was signed a month back.

Global IME Bank had at first decided to merge with Social Development Bank, then two weeks later it signed an agreement to merge with Gulmi Bikas Bank also. Global IME Bank was formed last year following the merger between commercial bank — Global Bank — and two finance companies — IME Financial Institution and Lord Buddha Finance. The due diligence audit has fixed Gulmi Bikas Bank and Social Development Bank’s share swap ratio at Rs 50 and Rs 40 for each Global IME share at Rs 100.

Prabhu Finance was a much sought after financial institution for merger by different institutions. However, it settled with Samridhdhi Bikas Bank and Baibhav Bikas Bank at a share swap ratio of Rs 75 and Rs 57 per unit share of the finance company at Rs 100.

Royal Merchant Banking and Finance, Api Finance and Rara Bikas Bank have fixed a share swap ratio of 1:1.

This year has already seen successful mergers of three sets of financial institutions that have started operations including NIC Bank and Bank of Asia Nepal that became NIC Asia Bank a week back. NIC Asia Bank is the first commercial bank that has been formed through the merger of two class ‘A’ financial institutions in the history of the Nepali banking system.

Last fiscal year, three finance companies merged into two commercial banks, and seven development banks and five finance companies completed mergers with each other.

Almost half of the existing financial institutions are opting for a merger and have approved the agenda from their annual general meetings as the market forces have compelled them to seek consolidation.

Moreover, the central banks’ plan to increase capital requirement will further compel financial institutions to seek mergers in the coming days.

Mergers have reduced the number of operating financial institutions in the country from 219 at the end of fiscal year 2010-11 to 213 by the end of fiscal year 2011-12 — the number is expected to go further down by the end of the current fiscal year.
src THT

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