9-4 share swap for UTI Bank, GTB merger

“The swap ratio was arrived after taking into account the book value, weighted earnings per share (EPS), average share prices in the past six months, and the future profits of both banks,” SBI Capital Markets Ltd’s managing director and chief executive officer, Birendra Kumar said in a news conference here today.

Says UTI Bank’s chairman and managing director (and the man nominated to head the new bank) P J Nayak: "It was not very easy to decide the swap ratio as both the banks have performed reasonably well in the last year. Both the banks are strong in their respective positions. But we will complement each other in our combined operations".

The new bank will come into effect from February 28, this year, after having the required approvals from the shareholders of both banks and the Reserve Bank of India.

Says GTB’s chairman and managing director, Ramesh Gelli: "UTI Global Bank is looking to grow 40 to 50 per cent, and wiil be looking to achieve 50,000 crore assets in three years. So there will be no need to trim the number of employees". As of now, both the bank have a staff-strength of around 1,000, amounting to a total of 2,200 employees.

The boards have decided to convey extraordinary general meetings of their respective banks on February 24, 2001. UTI Global Bank has planned to come up with their first balance sheet in March 31, 2001.

UTI Bank, founded by the Unit Trust of India (UTI), and Global Trust Bank, co-founded by veteran banking professional Ramesh Gelli, both represent a new breed of modern Indian banks established since 1994. UTI Bank is a leader in corporate banking but weak in retail banking, which is Global Trust’s strength. The union will create a corporate and retail banking powerhouse, said Nayak.

UTI Chairman P S Subramanium said the new bank should grow at 40 per cent in the next few years, and plans to enter the insurance sector, and will also look at an overseas listing in the next year. "The merger will create India’s largest private sector bank, but the vision will also be to make the bank into a truly global bank," Subramanyam said.

UTI, India’s largest mutual fund, will be the biggest shareholder in the new bank with a 19.8 per cent stake while GTB promoters will hold 16 per cent stake. UTI Global Bank will be the first new private sector bank to directly enter the insurance business in India.

Competitors ICICI Bank and HDFC Bank are both marketing insurance products of their parents, ICICI and Housing Development and Finance Corporation. "The time has come to enter into insurance. Negotiations are on with foreign partners and we will make an application for insurance" to the regulator, Subramanyam said. "Coupled with the name and goodwill of UTI, I would believe that we will emerge as the largest player in the the private sector insurance industry," he said.

Shares of UTI Bank ended 7.9 per cent higher at Rs 53.80 while GTB shares closed up 4.7 per cent at Rs 98.40 on the Bombay Stock Exchange on Thursday. The benchmark Bombay index closed 0.09 per cent higher. The board of the new bank will consist of 12 members with eight from UTI bank and rest from GTB’s shareholders.