Marketmen, while giving the thumbs up to Kotak Mahindra Bank’s acquisition of ING Vysya Bank, expect the financials of the consolidated entity to look up after being compressed initially, in the next 18 months.
Emkay Global says, “Return on Assets (RoAs) and Return on Equity (RoE) would compress to 1.6 per cent and 13 per cent for FY16. Nevertheless, a strong Tier I capital adequacy ratio of 16 per cent post-merger provides ability to leverage faster and low hanging fruits of productivity improvement can drive return ratios higher. In addition, concerns over Kotak Bank’s promoter holding come down as the stake gets lower by six-plus per cent to 34 per cent.”
Nitin Kumar and Pritesh Bumb of Prabhudas Lilladher says in their report, “Kotak Mahindra Bank has a better footing on certain products like tractors, which can be used to sell through Vysya Bank branch network in the South besides commercial vehicles/consumer finance (Vysya Bank is weak in consumer finance products). Alternatively, Vysya Bank brings along a robust SME franchise which Kotak has been keen to build.”
Outlining the risks to the deal, Motilal Oswal Financial Services says, “Integration of workforce of Vysya Bank with Kotak Bank, especially old employees linked to Indian Banks’ Association payroll (about 3,000), overlapping of branches in some of the key centres and improving the Vysya Bank branch productivity levels are key risks to the deal.”
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