Consolidation will help reduce the number of banks and make it easier for the government to manage them, said Anil Agarwal, head of Asian Financial Research, Morgan Stanley, after the government on Monday announced the merger of Dena Bank, Bank of Baroda and Vijaya Bank.
"If one were to look at the size of the bank which is getting merged, it is relatively small. So, on a pro forma analysis, the merger doesn’t look bad although execution will be tough," said Agarwal.
“Execution issues are there, we need to see how provisioning will pan out etc,” he said, adding that the house was not fond of state owned banks and is positive on only one of the PSU banks.
“Our stance for the last 4-5 years was just buy the retail lenders, be it a bank or NBFC because of a lot of ground being left for these banks to gain market share,” he said, adding that they still remain selectively positive on the spaces.
However, according to him, the recapitalisation move by the government was a big thing because it allowed PSU banks to recognise NPLs.
“So, we are saying buy corporate lenders but only the three largest corporate lenders," he added.