BT Corporate: Size Does Matter

B A N K I N G
Size Does Matter

Strength and size is what the GTB-UTI union is eyeing to make it big in the banking business.

By Roshni Jayakar

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In banking, like horse-breeding, parentage matters. If you have strong and healthy parents, chances are you'll be like them too. That probably explains why the banks spawned by institutions like HDFC and ICICI are doing swimmingly well. More important, that's perhaps why banking wiz Ramesh Gelli decided to merge his six-year-old, Secunderabad-headquartered Global Trust Bank (GTB) with UTI Bank last fortnight. A merger with UTI Bank doesn't give Gelli's baby a real parent, just a foster parent. Yet leviathan UTI's institutional backing will be a vital ingredient for making it big in the banking business.

But parentage isn't the only thing that matters. Size helps too. On its own, GTB had been quite a successful player, with 78 branches and Rs 6,198 crore worth of deposits. Its range of products, spanning corporate as well as retail banking, has been successful and it also has non-fund businesses like clearing operations and depository and custodial services. Yet, all that still makes GTB a boutique bank. In terms of deposits, advances, and growth, it's much smaller than its peers like HDFC Bank, ICICI Bank, and Centurion Bank.

Smallness can hamper growth and the sharp superbanker that he is, Gelli realises that. Says he: ''It's looking into the future that drove us to go for the merger. We could have survived on our own. But then, that wouldn't really make us a dominant player or a state-of-the-art bank in terms of products, technology, customer base, and profitability.'' Adds Sridhar Subasri, executive director, GTB: ''For the past few months, we had been discussing how to reach a critical size that can really make this bank a player to reckon with in the industry.''

How they stack up
	UTI Bank	Global Trust Bank
Total assets*	6,688.98	7,531.22
Deposits*	5,720	6,198.86
Net Profits*	51.06	108.62
Equity*	131.90	121.96
Net worth*	239.55	528.14
Net NPAs*	165.06	27.86
Capital adequacy (%)	11.37	13.68
No. of branches	79	78
ATMs	241	80
* Figures in Rs crore

That's exactly what drove two other new banks-HDFC Bank and ICICI Bank-to go in for mergers. In GTB's case, the merged entity (christened UTI Global Bank) will also have what it lacked before: UTI's support. Says a Mumbai-based banking sector analyst: ''Had Gelli let go the opportunity that UTI Bank presented, he would have been a loser.''

Unlike HDFC Bank, which was more than double the size of Times Bank, and ICICI Bank, which is three times the size of Bank of Madura, the GTB-UTI Bank union is like the merger of equals. UTI Bank's deposits and advances are Rs 5,720 crore and Rs 3,506 crore, respectively, while GTB's are Rs 6,198.85 crore and Rs 3,211.01 crore, respectively. UTI Bank's share capital is Rs 131.90 crore, while GTB's is Rs 121.36 crore. After the merger, the swap ratio of 2.25:1 or 9 shares of UTI Bank for 4 shares of GTB, will result in an share capital of Rs 180 crore.

More important, the merged bank will have a customer base of 1.2 million (GTB and UTI Bank each have 6 lakh customers), a network of 157 branches, and boast 321 ATMs. Gushes Gelli: ''What would take another three years for GTB alone, we are reaching overnight.''

A stronger, bigger bank is what UTI Global wants to be. Says UTI Bank's CEO P.J. Nayak, who will be the merged bank's Chairman and Managing Director: ''Our endeavour is to ensure that one organisation does not get subsumed into the other, but to create a larger and also a stronger bank.'' Evidently, that's what it's all about in the business of banking.

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