ManagementIDBI Bank homes in on Federal Bank for acquisition
State-owned IDBI Bank is believed to have zeroed in on Kerala-based private sector lender Federal Bank for acquisition.
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IDBI Bank has also completed due diligence — an exercise undertaken by an acquirer to assess the value of the entity before purchasing it — a source close to the development said.
When contacted, Federal Bank Managing Director & CEO M Venugopal declined to comment on the matter.
The acquisition, if it materialises, would enable IDBI to consolidate its position among state-run banks by strengthening key segments such as branch network,human resources and client acquisition, besides augmenting its deposit base.
With 641 branches, the Federal Bank is one of the largest private sector banks in the south with a total business of around Rs 59,000 crore and deposits of Rs 33,439 crore.
IDBI Bank, which had acquired United Western Bank a few years ago, has been on the look out for another private sector bank with a strong deposit base and technology advantage.
The bank, the source said, had initially shortlisted a host of medium-sized banks such as South Indian Bank, Karnataka Bank and Bank of Rajasthan along with Federal Bank as potential targets.
IDBI Bank narrowed down on the Federal Bank after assessing its financial strength and possibilities of seamless integration in terms of work culture, the source said.
IDBI Bank Chairman and Managing Director Yogesh Agarwal had recently spoken about the bank identifying a private sector lender and completing due diligence. “It is a private sector bank. Talks are on. Due diligence has been done. I cannot commit on the time-frame,” Agarwal had said.
At one point of time, Federal Bank itself was in talks for acquiring Thrissur-based Catholic Syrian Bank (CBS), though the deal could not materialise.
Although the Federal Bank made an offer to acquire CSB for around Rs 400 crore, the CSB board, which met last week, did not find the deal attractive.
If IDBI Bank manages to execute the acquisition quickly, it will have to seek government assistance for equity capital unless the deal is an all-cash transaction. The government owns above 52 per cent in the bank.