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GTB shareholders to gain from merger with UTI Bank

NetScribes/Pallavi Rao

The merger of UTI Bank and Global Trust Bank (GTB) will favour the latter's shareholders, analysts tracking the sector said on Thursday. The deal was announced after the close of market hours on Wednesday. Analysts expect the GTB scrip to touch Rs 150-160 levels in the next week, even as the UTI Bank scrip moves up to Rs 70 levels.

On Thursday, the GTB scrip gained Rs 10 in the first hour of trading on the Bombay Stock Exchange and was trading at around Rs 105. The UTI Bank scrip also rose by Rs 4 to Rs 53.

"GTB may gain more than Rs 50," said Paresh Kothari of Khandwala Securities. "UTI Bank will also gain marginally. At its current levels, UTI Bank already has a higher valuation," he added.

The general perception is that GTB is currently undervalued, given its lower non-performing asset (NPA) levels. At 1.8 per cent, GTB's NPAs are much lower than that of UTI Bank's 4.7 per cent. That's one of the prime reasons why the GTB share shot up 16 per cent on the BSE on Wednesday against UTI Bank's 3 per cent rise.

"GTB will be favourably affected. The swap ratio will be around 2.5:1," said an analyst at UBS Warburg. The boards of UTI Bank and GTB will meet on January 27, 2001 to consider the swap ratio for the merger, based on the valuation by SBI Capital Markets.

"GTB's balance sheet is better than that of UTI Bank. It is also valued lower. The merger will result in a fundamentally strong bank," said Anand Shanbag, banking analyst at HSBC Securities.

The merger is, however, different from the HDFC Bank-Times Bank and ICICI Bank- Bank of Madura mergers, where the smaller banks lost their identities. They were amalgamations more than mergers. In this case, though, it will be a merger in the true sense, and will result in the creation of a new bank - UTI Global Bank - which will be the largest private sector bank in terms of assets.

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