In the world of economic progress, your banking experience holds significance. See, banks seeking expansion often resort to mergers and acquisitions. Governments step in when issues like non-performing assets (NPAs), inefficiency, limited global presence, and financial challenges plague banks.
A similar situation occurred in 2019 when the government orchestrated the union of three public sector banks—Vijaya Bank, Dena Bank, and Bank of Baroda (BOB). This fusion propelled BOB to claim the title of India’s third-largest bank.
But, was the Bank of Baroda merger truly transformative? Dive into this article as we unravel the impacts on you, the customer, and the banks involved.
Let’s begin!
(A) Synopsis of Bank of Baroda Merger & Its Impact
The merger of Bank of Baroda, Dena Bank, and Vijaya Bank came into effect on April 1, 2019. By combining these three banks, the government aimed to improve their financial performance and competitiveness on a global scale.
The merged entity became the third-largest public sector bank in India after the State Bank of India (SBI) and Punjab National Bank. The amalgamation resulted in increased business volume, greater market presence, and an extended network of branches and ATMs.
The officials have revealed the following data-
- Combined Market Capital: 14,82 lac Crore
- Domestic branches of the entity: 8.248
- ATMs across India: 10,318
Following the merger, the three banks’ separate identities ceased to exist, and they all started operating under the brand name “Bank of Baroda.”
For customers of Dena Bank and Vijaya Bank, there were changes in account numbers and banking processes. Reason? Because they were integrated into the Bank of Baroda’s systems. However, customers were provided with sufficient information and assistance during the transition period to minimize disruptions.
Note: We have already explained “7 Biggest Bank Merger List in India- 2023” where Bank of Baroda merger holds the third position in the list. Go through the article to get more details on bank mergers in our country.
(B) How many Bank of Baroda mergers occurred?
By now you know that the Bank of Baroda merged with Dena Bank and Vijaya Bank. This is the latest merger with BoB. But the surprising fact is this isn’t the first merger of Bank of Baroda. Yes, it has gone through numerous mergers ever since 1958.
Look at the table below-
| Year | Bank of Baroda Merger |
| 1958 | The Hind Bank |
| 1961 | The New Citizen Bank Ltd |
| 1963 | Surat Banking Corporation |
| 1964 | Tamil Nadu Central Bank Umaraon Peoples Bank |
| 1972 | Ugandan Business of Bank of India |
| 1975 | Bulk of shares in Nainital Bank, Bareilly Corporation Bank in Uttar Pradesh |
| 1988 | Delhi’s 34 Branches of Traders Bank Ltd. |
| 1993 | London branch of Union Bank of India and Punjab & Sind Bank |
| 1999 | Bareilly Corporation Bank |
| 2002 | Benares State Bank Ltd |
| 2004 | South Gujarat Local Area Bank |
| 2019 | Dena BankVijaya Bank |
From the next section onwards, we will go through the financial analysis of the before & and after conditions of the Bank of Baroda Merger. And that too with Vijaya Bank and Dena Bank.
(C) Impact of Bank of Baroda Merger
In this section, we will go through the financial and non-financial impact of the Bank of Baroda Merger.
(C.1) Financial Impact
First of all, let’s have an overview of the financial metrics of the then vs now of the Bank of Baroda merger.
| Financial Metrics | Pre-Merger (2019) | Post-Merger (2020) | Post-Merger (2021) | Takeaway |
| Operating Profit (in Crores) | Rs.13,487 | Rs.18.896 (40.11% increase) | Rs.20,630 (52.96%) | Improved financial performance |
| Net Profit(in Crores) | Rs.434 | Rs.546 (25.81% increase) | Rs.830 (91.01% increase) | Improved financial performance |
| Capital Adequacy Ratio (%) | 13.42% | 13.3 | 14.99 | Bank can handle unforeseen losses |
| Earnings Per Share(EPS) | Rs.1.64 | Rs.1.36 | Rs.1.78 | Dynamic nature of profitability on a per-share basis |
| Return on Assets (%) | – | Increased | Increased | Improved efficiency in asset utilization |
| Return on Equity (%) | – | Increased | Increased | Better efficiency in shareholder returns |
| Deposits Growth (%) | – | 48.11% | 51.40% | Increased liabilities |
| Advances Growth (%) | – | 47.20% | 50.66% | Expanded lending portfolio |
(C.2) Non-Financial Impact
Apart from finances, there are other sections that are affected by the Bank of Baroda merger. Let’s look at some of the significant ones-
| Non-Financial Impact | Description |
| Operational Efficiency | Enhancements in day-to-day operations and overall efficiency through resource consolidation and process streamlining |
| Geographical Expansion | Increased reach and presence in various regions, serving a broader customer base as a result of the merger |
| Technology Integration | Harmonization of technological systems, potentially leading to improved digital services and infrastructure |
| Human Resources and Culture | Changes in staffing, organizational culture, and employee morale due to shifts in the workforce post-merger |
| Customer Experience | Impact on customer services, products, and accessibility, influencing overall customer experience and satisfaction |
| Brand Perception | Changes in how the public and stakeholders perceive Bank of Baroda in terms of trust, reliability, and corporate identity. |
| Regulatory Compliance | Adherence to regulatory standards and the successful navigation of regulatory challenges during and after the merger |
| Synergy Realization | Achievement of expected synergies and strategic goals set forth during the merger process |
| Market Positioning | Changes in market share, competitiveness, and overall positioning of Bank of Baroda relative to other financial institutions |
| Community Impact | Effects on communities served by the merged banks, including alterations in community engagement and corporate social responsibility initiatives |
Note: Do you know, recently Bank of Baroda was trapped in the controversies due to its misconduct and fraud? Go through the article- “What is Bank of Baroda fraud? Exposing the misconduct” for more details.
(D) Financial Impact of Bank of Baroda Merger
As you know, banks are financial entities. Hence, the biggest impact of bank mergers occurs on the financial segment. Similar is the scenario with the Bank of Baroda Merger.
The following subsections describe the financial analysis before and after of Bank of Baroda Merger. The year 2018 and 2019 represent the pre-merger era while the years 2020 and 2021 represent the post-merger era of the Bank of Baroda merger.
(D.1) Operating Profit (in Crores)
| Year | BoB (Standalone) | Vijaya Bank | Dena Bank | Post-Merger BoB |
| March 31, 2018 | 12,006 | 3,098 | -1,923 (Loss) | – |
| March 31, 2019 | 13,487 | – | – | – |
| March 31, 2020 | 18,896 | – | – | 18,896 |
| March 31, 2021 | 20,630 | – | – | 20,630 |
The table illustrates the standalone operating profits of Bank of Baroda (BOB) before and after its merger with Vijaya Bank and Dena Bank. It highlights the contributions of each entity to the overall operating profit.
(D.2) Net Profit (in Crores)
| Year | BoB (Standalone) | Vijaya Bank | Dena Bank | Post-Merger BoB |
| March 31, 2018 | -2,432 | 727 | -18.06 (Loss) | – |
| March 31, 2019 | 434 | – | 6.83 | – |
| March 31, 2020 | 546 | – | – | 546 |
| March 31, 2021 | 829 | – | – | 829 |
This table outlines the standalone net profits of Bank of Baroda and its merged entities before and after the merger, shedding light on the financial performance over the specified years.
(D.3) Non-Performing Assets (NPA) (in Crores)
| Particulars | 2018 | 2019 | 2020 | 2021 |
| BoB (Gross) | 56,480 | 48,233 | 69,381 | 66,671 |
| BoB (Net) | 23,483 | 15,610 | 21,577 | 21,800 |
| Vijaya Bank (Gross) | 7,526 | – | – | |
| Vijaya Bank (Net) | 5,021 | – | – | |
| Dena Bank (Gross) | 16,361 | – | – | |
| Dena Bank (Net) | 7,839 | – | – | |
| Post-Merger BoB (Gross) | – | – | 69,381 | 66,671 |
| Post-Merger BoB (Net) | – | – | 21,577 | 21,800 |
This table provides insights into the non-performing assets (NPA) of Bank of Baroda, Vijaya Bank, and Dena Bank before and after the merger. It highlights the changes in both gross and net NPA, emphasizing the impact of the merger on asset quality.
(D.4) Non-Performing Assets Percentage
| Year | BoB (Gross %) | BoB (Net %) |
| 2018 | 12.26 | 5.49 |
| 2019 | 9.61 | 3.33 |
| 2020 | 9.4 | 3.13 |
| 2021 | 8.87 | 3.09 |
This table calculates the percentage of non-performing assets (NPA) concerning gross and net values, offering a comparative view before and after the merger.
(D.5) Capital Adequacy Ratio (CAR) Percentage
| Year | BoB | Dena Bank | Vijaya Bank | Post-Merger BoB |
| 2018 | 12.13 | 11 | 13.90 | – |
| 2019 | 13.42 | 13.90 | – | – |
| 2020 | 13.3 | – | – | 13.3 |
| 2021 | 14.99 | – | – | 14.99 |
This table reflects the Capital Adequacy Ratio (CAR) percentages for Bank of Baroda, Dena Bank, and Vijaya Bank, both before and after the merger. A higher CAR indicates a better ability to cover potential losses.
(D.6) Earnings Per Share (EPS) Percentage
| Year | BoB | Dena Bank | Vijaya Bank | Post-Merger BoB |
| 2018 | -10.53 | -18.06 | – | – |
| 2019 | 1.64 | – | – | – |
| 2020 | 1.36 | – | – | 1.36 |
| 2021 | 1.78 | – | – | 1.78 |
The table portrays the Earnings Per Share (EPS) for Bank of Baroda, Dena Bank, and Vijaya Bank before and after the merger, providing an overview of the bank’s profitability per share.
(E) Financial Analysis of the Bank of Baroda merger – Key Takeaways
To understand the bank’s situation post-merger, we delved into data from BOB’s annual reports for the two years before and after the merger.
After joining forces, the bank saw notable growth in both operating earnings and net profits. In 2020, operating profit reached Rs.18,896 crore, marking a 40.11% increase, while net profit rose to Rs.546 crore, showing a 25.81% uptick compared to 2019. The upward trend continued in 2021, with operating profit surging to Rs.20,630 crore (a 52.96% increase) and net profit reaching Rs.830 crore (a substantial 91.01% growth over 2019).
The capital adequacy ratio improved, despite a slight dip of 0.12% in 2020 and a subsequent increase of 1.57% in 2021, indicating the bank’s enhanced ability to handle unforeseen losses. Although earnings per share dipped to Rs.1.36 in 2020, they rebounded to Rs.1.78 in 2021. Post-merger, Return on Assets, and Return on Equity percentages both went up, highlighting the bank’s improved standing.
Deposits showed significant growth of 48.11% and 51.40% in 2020 and 2021, respectively, compared to 2019, indicating increased liabilities. Additionally, advances are projected to grow by 47.20% in 2020 and 50.66% in 2021, expanding the bank’s lending portfolio.
Despite overall progress, non-performing assets experienced an undesirable increase on both gross and net bases. In contrast to 2019, they rose by 43.85% (gross) and 38.23% (net) in 2020 and by 38.22% (gross) and 39.65% (net) in 2021.
Minimizing NPA remains a challenge for the bank, considering its negative implications for expansion. Nevertheless, the Bank of Baroda has exhibited improved overall conditions and an expanded public service area post-merger.
(F) Final Words on Bank of Baroda Merger
In wrapping up, the merger of Bank of Baroda with Vijaya Bank and Dena Bank has left a lasting impact.
Financially, you witnessed substantial growth in operating and net profits, signifying improved performance. However, challenges arose with the increase in non-performing assets. Beyond numbers, the merger affected operational efficiency, expanded geographical reach, and ushered in technological integration.
Changes in human resources, customer experience, and market positioning were evident. While achieving synergies, the bank navigated regulatory compliance. The outcome is a transformed entity with improved financials, extended community reach, and a strategic position in the banking landscape!
