The country’s largest commercial bank, State Bank of India has announced that the bank plans to merge all the associate banks with itself by March 2009. The move comes at a time when SBI is gearing up for a rights issue which, at an estimated Rs 17,000 crore, is one of the biggest mop ups from the domestic capital markets. The bank is looking to consolidate its position as a global giant with its balance sheet expected to grow manifold. SBI had earlier this month approved merger of State Bank of Saurashtra with itself.

Mr. O P Bhatt, Chairman, SBI said, “Once we get the cabinet nod for merger of State Bank of Hyderabad (SBH), it will set the ball rolling for the merger of the other associate banks. The issue of consolidation of associate banks was taken up only by the boards of SBI and SBH. The boards of other banks have not been sounded about the merger plans.”

SBI has 100% stake in three associate banks — SBH, SBP and SBS —while in others its equity holding ranges from 75% to 98%.

Mr. Bhatt further added, “Once the SBI-SBH merger is through, the consolidation of other entities should not take long as most of the ground work has been done and only the execution is left and It has to happen before March 2009.”

The associate banks are State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Indore, State Bank of Saurashtra and State Bank of Mysore. The associate banks have together posted a year-on-year growth of 16.85 per cent in net profit at the end of September 2007.

G D Nadaf, General Secretary, All India State Bank Officer's Federation's (AISBOF) said, “The decision of the board to meet on January 25, to consider the merger, is quite unilateral. The federation along with the United Forum of Bank Unions (UFBU) and State Bank of India Staff Federation (AISBISF) will meet on January 3, where we will discuss the merger issue and the future course of the protest."

Sources said, once the proposed mergers are completed, SBI’s asset size will become more than double of ICICI Bank. The private sector banking major ICICI Bank is currently the closest competitor to SBI.

The Bank presently holds market cap worth Rs. 1,26,206 crore, PE Ratio of 22.56. The stock is fairly priced with an EPS of 106.32 and BV of 594.69. The firm had showed a net profit of Rs 1611 crore for the quarter ended September 2007 as against Rs. 1184 crore in same quarter of last year.

At 12:30 PM, the share was trading at Rs 2397 on NSE, up by 3% with previous close of Rs. 2334. It touched an intraday high of Rs 2413 and low of Rs 2351.