NIBL, EBL merger proposal on choppy sea

The proposed merger of Nepal Investment Bank Limited (NIBL) and Everest Bank Limited (EBL) is now on hold following discontent within the NIBL over the proposed plan. Some of the NIBL board members and senior staffers are uncomfortable over the merger plan and claim NIBL Chairman Prithivi Bahadur Pande did not inform them about the plan. The issue was debated in the NIBL's board meeting on Friday. Pande, however, has been maintaining that there had been just a preliminary understanding between the chairmen of two banks. "Now, the whole process is on hold for now," said a senior NIBL official.

The two sides had signed a preliminary memorandum of understanding (MoU) for further negotiations, according to the NIBL letter sent to Nepal Stock Exchange (NEPSE) on Sept 21. The NEPSE had sought details from the two banks following news reports about the proposed merger. The EBL had also responded with similar content in its letter sent to NEPSE on Sept. 17. Both banks have, however, maintained that the initial understanding was yet to be considered and approved by their respective board of directors.

The NEPSE had asked them banks about the status of the merger process to determine if the capital market should suspend the share trading of both. "We have to suspend shares trading of merging banks to prevent a sudden volatility in their share prices," said Shankar Man Singh, general manager of the NEPSE. He, however, said that the NEPSE allowed continuation of shares trading after it was known that board of directors of both banks were yet to endorse the initial agreement. Even the EBL staff were in dark about the proposed merger. EBL Assistant General Manager Hum Nath Gurung said that they came to know about the understanding later. "The rumour and controversy has affected the process," he added. Some board members of the NBIL maintain that the merger can be possible only if NIBL has a majority stake during the merger, amid reports that Pujab National Bank that has a stake in EBL had sought the majority stake.

The issue is likely to be hotly debated in the annual general meeting of EBL that is to be held on Thursday as well. If the process goes ahead, it would be the biggest ever merger in Nepal's banking history. Nepal Rastra Bank (NRB) also has a policy of encouraging mergers amid the growing number of banks and financial institutions so that it creates space for new entrants.

Source: 
ekantipur