Mumbai: Canara Bank, the country's third largest bank, is looking at the possibility of acquiring Dena Bank and has appointed Ernst & Young to work out a deal. The chairmen of both the banks are expected to meet shortly, after which the matter would be taken up by the respective boards and employees would be consulted.
Canara Bank has a network of 2,542 branches and is strong in the south while Mumbai-based Dena Bank, with its 1,050 branches, has a large presence in Maharashtra, Gujarat and Chhattisgarh. It overtook Punjab National Bank in 2005-06 to become the country's second-largest public sector bank in terms of advances and deposits.
The government holds 73 per cent stake in Canara Bank and 52 per cent in Dena Bank - it holds a little over the statutory cap of 51 per cent in the latter, which restricts the bank from raising further capital by diluting its stake.
The merger will help Dena Bank, which has just come out of a huge burden of sticky loans or non-performing assets (NPAs). Though it is now better off financially, it has a limited capital base to grow business at the rates that the banking sector has seen in the last three years.