Mumbai: Banks are back at consolidation game. Canara Bank, with an asset book of Rs1,53,339 crore, is looking at acquiring smaller rival Dena Bank, with assets of just Rs29,160 crore, CNBC-TV18 reported quoting finance ministry sources.

Canara Bank, which has a network 2,542 branches, is strong in the South while Dena Bank with its 1,050 branches has a large presence in Maharashtra, Gujarat and in Chattisgarh.

Reports quoting reliable sources said that Canara Bank is considering acquisition of Dena Bank and that it has already appointed Earnst & Young as a consultant to do the groundwork

The net interest margins of the two banks are about the same at three per cent, but Canara Bank's price to book is better at 1.21 versus Dena's 0.89. Dena Bank also has gross non-performing assets (NPA) of 4.9 per cent compared with Canara Bank's 2.06 per cent.

Financials apart, an eventual merger would also depend on inter-UPA politics and the government's ability to withstand pressure from the allies, especially the Left parties.

It should be noted that the much talked about Bank of India-Union Bank merger fell through because of Left and union pressure which the government was unwilling to take on.

Both Canara Bank and Dena Bank, however, denied plans for any merger.

In case of a merger, Canara Bank's asset base will grow from Rs13,28,22 crore to nearly Rs1,60,000 crore, making it the largest nationalised bank in the country ahead of Punjab National Bank. However, it would continue to be behind State Bank of India and ICICI Bank.