For banks, the last quarter of the financial year is usually time for consolidation rather than change. This is the time when they go full throttle on lending and beef up their top line before closing their books for the year. The year 2019 will, however, see a lot of front-ending of events in the private sector and also among state-owned lenders as the government is likely to push through some key decisions ahead of the elections.
On the cards is a decision on transfer of surplus funds by the Reserve Bank of India to the government. This is likely to follow the report of the Bimal Jalan-led committee, which is expected before end-March 2019. The government is simultaneously going full-steam ahead on its decision to consolidate the three public sector banks — Bank of Baroda, Dena Bank and Vijaya Bank. Management consultancy firm EY has already been appointed to help in the process.
The other major M&A activity in the public sector that will conclude in the first quarter of 2019 will be LIC’s acquisition of IDBI Bank. LIC has said that it will pay shareholders who respond to its open offer for purchase of IDBI Bank stock on December 31. This means that the process will be completed in the third quarter. LIC’s acquisition, through infusion of fresh capital, will bring IDBI Bank out of RBI’s prompt corrective action plan. LIC plans to professionalise IDBI Bank on the lines of Axis Bank.
Additionally, the fourth quarter is when SBI’s mega qualified institutional placement of equity shares is expected. SBI aims to raise Rs 20,000 crore as it prepares itself for a surge in lending in 2019.
Early 2019 will also see the conclusion of the last chapter in the high drama in several private banks. Justice B N Srikrishna, who is looking into the conflict of interest allegations at ICICI Bank, is expected to submit his report in the coming weeks. This will put an end to the controversy in the bank, which culminated in the resignation of Chanda Kochhar. In Kotak Bank, the Bombay high court will decide on the lender’s plea to retain its promoter’s shareholding at above 20%. Kotak Bank has filed a writ petition challenging the central bank’s order to dilute promoter holding to 20%.
The new year will be the most eventful for Yes Bank where the lender’s founder, promoter and CEO Rana Kapoor is expected to step down in January 2019 and make way for a new chief executive. The year is also likely to see a truce between the two promoter group’s Rana Kapoor and his sister-in-law Madhu Kapur who have been fighting in courts over the right to appoint directors.
Axis Bank will also see a new beginning with newly-appointed CEO Amitabh Chaudhury taking charge from January 1 in place of Shikha Sharma who completes her term in December.