Merger between Investment Bank & Everest Bank hotly debated

Before it has even materialised, the proposed merger between two leading commercial banks of Nepal seems to have hit the rough weather. A week after the news about the proposed merger between Nepal Investment Bank Limited (NIBL) and Everest Bank Limited (EBL) appeared in the local media, some board members at the NIBL has opposed the plan. A source close to the NIBL said that the merger issue was hotly debated in the NIBL Friday's board meeting. Prithivi Bahadur Pande, chairman of the NIBL, hinted that there were notes of dissent about the merger proposal at the board meeting. "It is natural to see opposition when we start to do a new thing," Pande told the Post. He didn't elaborate what the level of dissent was. .

For their part, some board members and the senior bank staff say they were kept in the dark by Chairman Pande about the proposed merger plan. "It would have been better had the board and senior management been informed about it," said a board member on condition of anonymity. Pande said that it was "an informal dialogue" between two chairmen and "nothing has been finalized yet." "It is not necessary to take approval for informal dialogue," said Pande, the NIBL chairman. "It is necessary to get the board's approval for the formal merger process." According to media reports, there was a meeting between the NIBL Chairman and B.K. Shrestha, chairman of the EBL, in New Delhi in the last week of August for the merger between the two banks. Pande admitted that there had been talks between him and Shrestha to "test waters." India's Punjab National Bank (PNB) that has a 20 percent stake in the EBL is said to be positive about the merger.

Pande termed the meeting between him and Shrestha in New Delhi as just a case of testing the waters. "Until there are formal talks, it should not be taken as a merger taking place between the two banks," said Pande. The NIBL board member say they are not against the merger per se. "Our concern is that the NIBL must have a majority stake in case of a merger," he said. "We can't allow the NIBL to merge with the EBL in a scenario where NIBL would lose its identity." While how much stake the NIBL and the EBL each will have after the merger has not been finalised, media reports say the PNB is keen to get majority stakes. Also, the PNB wants the majority management of the bank. And, this is the issue that has made the senior management of the NIBL jittery.

The senior staff at the NIBL is of the view that there should not be a change in the top management structure. "One major concern for them is that of job security," said the board member. The NIBL (earlier Nepal Indosuez Bank) was established in 1986 as a joint venture between Nepali and French partners. The French partner with 50 percent holding of the capital of NIBL was Credit Agricole Indosuez. But the French company, in 2002, sold its stake to a Nepali group of companies comprising bankers, professionals, industrialists and businessmen. Since then, Pande has been leading the NIBL and has, in the last eight years, made the NIBL as one of Nepal's leading banks. In the last fiscal year, its net profit was the highest amongst the private sector banks. As of now, its promoters have a 50 percent stake while Rastriya Banijya Bank and Rastriya Beema Sansthan, both government entities, each hold a 15 percent stake. The noise of the merger in fact began two years ago. The NIBL had then upgraded its banking software from Pumori to Finnacle which the EBL was already using.

Source:
ekantipur