ICICI Bank to mull take-over of United Western

ICICI Bank India's second largest lender, said its board will meet on Monday to consider taking over the struggling United Western Bank. The central bank on Saturday placed United Western Bank under moratorium till December 1 to protect its depositors and said the aim was to merge the bank with a stronger one.
"The board will meet on September 4 to consider whether an expression of interest should be submitted to the Reserve Bank of India (RBI) for amalgamation of United Western with ICICI Bank," ICICI said in a statement on Sunday.
If the New York-listed bank takes United over it would be its second major acquisition, having bought the Bank of Madura a few years ago which established its presence in Southern India.
United Western Bank has thousands of depositors with aggregate deposits of 64.8 billion rupees ($1.39 billion) and outstanding loans worth 40.06 billion rupees, the central bank said.
But "inefficient management" allowed its capital to risk weighted assets ratio (CRAR) to turn negative and bad loans rise much above the levels of its peers, the RBI said.
India's central bank has historically placed weak banks under moratorium before finding a right partner to merge them with, usually a state-run bank.
It merged Global Trust Bank with the state-run Oriental Bank of Commerce a few years back and the Nedungadi bank with the state-run Punjab National Bank.
This time also the central bank is favouring a state-run bank to acquire United Western.
"Generally, preference is given to public sector banks (for merger)," Anand Sinha, executive director at the central bank had told reporters on Saturday.
Recent moratoria and subsequent mergers include Ganesh Bank of Kurundwad Ltd, with the Federal Bank.
Although United Western is struggling financially with its bad loan ratio running at 5.66 percent compared with its peers' 1.97 percent, it has the right infrastructure 230 branches in nine states to fuel strong growth for ICICI Bank, said an analyst at a local brokerage.
In addition United Western's reach in Western India could help ICICI access funds at lower costs in smaller towns than in cities where it is strong, he said.
ICICI, along with many other banks, has been paying higher interest rates on deposits to feed the strong loans growth in Asia's fourth largest economy as the central bank has been raising short term rates to contain inflation.