Merger plan erases $2.8bn from ‘Indian banks’

Bloomberg

India’s plan to merge state-controlled lenders as a way to resolve its bad-debt issue didn’t thrill investors.
The proposed union of Vijaya Bank and Dena Bank with Bank of Baroda fanned speculation of further consolidation in the
sector. While some state-run lenders rose on Tuesday, most fell on concerns about eroding capital buffers and growing bad debt for buyers. Overall, the 22 banks listed on Indian stock exchanges lost about $2.8 billion of market value.
“The issue is: it will be a long, long time before anything happens, and a long path to work out the bad-loans issue,” said David Smith, chief investment officer at Smith Tan Asset Management Pte. “The price response shows it’s a boon for the weak and a new headache for those getting better.”
Dena Bank, the weakest of the companies in the merger plan, jumped 20 percent on Tuesday, the most in more than a decade.