SBI not to invest in further small buyouts

By SiliconIndia   |   Monday, 18 December 2006, 06:00 Hrs
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Mumbai: The State Bank of India, in a detour from the days of A.K. Purwar, its ex-chairman, has decided not to go in for further buyouts of small overseas banks. This was announced by the current chairman O.P. Bhatt, after the SBI completed the deal for buying 76 percent stake in a small bank in Indonesia, PT Bank IndoMonex, for $5 million. The Hindu Business Line reported this today.

Bhatt also stated that the buyout of another small African bank has been put on hold in view of the shift in policy. He stated that it was not technically and legally for SBI to withdraw from the Indonesian deal, which was signed in November 2005, when Purwar was the chairman.

SBI will have to spend $12 million now to get the forex license for the Indonesian bank. "Buying small banks doesn't make business sense for SBI," Bhatt told Business Line.

"We will go for overseas acquisition only if it is a sizable bank. Acquiring banks worth $3 million or $5 million doesn't make business sense. The cost is enormous and we don't get (adequate) returns. But if the bank is worth $300 million instead of $3million, we may look at it," Bhatt said.

Purwar regime

With Purwar at the helm last year, SBI had acquired Indian Ocean International Bank in Mauritius for $8 million, as also a 76 per cent stake in Giro Commercial Bank in Kenya for $7 million and a 75 percent majority stake in the Indonesian Bank PT Bank IndoMOnex for $5 million. On the anvil were buyouts of two more small banks in Bangaldesh and another in Africa. These acquisitions/ buyout were art of Purwar's efforts to expand SBI's global reach.

But Bhatt is opposed to such expansion. "It doesn't make any sense for a bank like SBI to buy a small bank abroad just to have its presence in that country. If we get a good offer and the country in which the bank has a good business fit with our country's trade, then it makes sense to look at it. In any case, we are not actively looking (overseas acquisition)."

As part of the plans review, the bank is also planning a re-look at its own overseas operations. Said Bhatt to Business Line, "I will not grow market share at the cost of profitability. It does not make sense to have a few branches overseas. I would prefer consolidating their operations rather than acquiring few more branches."

Currently SBI has its branches in 32 countries.

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