“ MERGERS AND ACQUISITIONS IN INDIAN BANKING

SECTOR”

Submitted by

Kanwalpreet Kaur Gujral

22121102

Supervised by

Prof. Maaz khan

Abstract

Purpose – The article aims to analyze the growth of India's banking sector,
emphasizing the significance of mergers, acquisitions, and governmental reforms. It
highlights the sector's evolution into a pivotal driver of economic expansion,
addressing challenges like the 1997 financial crisis and transitioning towards a
service-oriented economy. Ultimately, it underscores the importance of ongoing
reforms to bolster competitiveness and ensure sustained economic growth.

Design/methodology/approach – The research methodology employs a comparative

analysis of pre and post-merger financial performance across multiple banks,
including Bank of Baroda, Punjab National Bank, Canara Bank, Union Bank, and
Indian Bank. Data collection relies on secondary sources such as annual reports,
published papers, and newspapers, while analysis utilizes SPSS Software for
statistical evaluation through Ratio Analysis and Paired Sample T-Test. The study
aims to test hypotheses regarding the significance of changes in financial metrics
before and after mergers and acquisitions within the selected banking units.

Findings – The findings indicate significant shifts in financial ratios among banks
before and after mergers. Bank of Baroda displayed the lowest operating profit ratio
post-merger, while Union Bank of India exhibited the highest. Additionally, post-
merger, Bank of Baroda demonstrated the highest net profit ratio, contrasting with
Punjab National Bank's highest ratio pre-merger.

1. Introduction
One of the main engines of the Indian economy is thought to be the banking industry.
The Indian banking industry has accomplished a great deal in a short period. Over the
past few years, there have been several notable mergers and acquisitions in the Indian
banking sector. Mergers and acquisitions have a variety of effects on different areas of
the Indian economy. The Indian financial crisis of 1997 was the catalyst for the start
of the bank reform. Non-Performing Assets grew during the economic downturn.
Globalization and liberalization also put the financial sector to the test, increasing the
need for bank oversight and sparking a wave of mergers and acquisitions in this field.
Global corporate restructuring has mostly relied on mergers and acquisitions, and the
financial services sector has seen a wave of mergers that have produced several very
large banks and financial institutions, also weak banks were forced to merge in certain
nations, including Germany, to prevent the issue of financial crisis brought on by bad
loans and the depletion of capital funds. Several scholarly investigations look at the
benefits of mergers in the banking industry, and these investigations have taken one of
the two opposing tacks. The first approach analyses accounting data, such as
operational costs, return on assets, and efficiency ratios, to assess the long-term
performance of mergers. It is presumed that a merger will lead to improved
performance if the change in accounting-based performance is larger than the changes
in the performance of comparable banks that were not engaged in merger activity.
Nonetheless, the importance of banks in the modern economy cannot be understated.
The banking sector is vital to the country's economic expansion. As a financial
institution, the banking industry manages several duties such as receiving deposits and
extending credit to companies operating in the industrial and agricultural domains.
The Indian economy is about to undergo a metamorphosis that will coincide with the
shift from manufacturing to the growing service sector. India's banking industry as a
whole is changing. The banking sector has seen a large number of mergers and
amalgamations in recent years. The Reserve Bank of India (RBI) and the Central
Government are authorised to create a plan for the merger of any nationalised bank
with another nationalised bank or the banking sector under the terms of the Banking
Companies Acts of 1970 and 1980 (Acquisition and Transfer of Undertaking). Over
the past thirty years, India's banking industry has accomplished a number of
noteworthy goals. The most noteworthy aspect is how extensive it is. One of the main
reasons India is progressing is that its banking system has reached even the most
remote parts of the country. An account holder used to have to wait hours on end to
acquire a draft or withdraw his own money from the bank counter. But now they have
a choice. Furthermore, the most efficient bank required two days to transfer money
across its locations. However, it's as simple as sending an instant message these days.
Money is the currency of the day. India's banks were essential to the country's
socioeconomic growth after independence. The slow implementation of financial
sector reforms has led to rapid changes for Indian banks, bringing them through an
exciting period. It is important to view the current transformation process as an
opportunity to make Indian banking a strong, stable, and dynamic system that can
operate effectively and independently of the government.

1.1 India's List of Megabank Mergers for 2019–2020

ACQUIRING ACQUIRED YEAR OF

BANK BANK MERGER
1. Bank Of Vijaya Bank, April 1,
Baroda Dena Bank 2019
2. Punjab Oriental Bank April1, 2020
National Bank Of Commerce,
United Bank
Of India
3. Canara Syndicate April1, 2020
Bank Bank
4. Union Bank Andhra Bank, April 1,
Of India Corporation 2020
Bank
5. Indian bank Allahabad April 1,
Bank 2020

2. Literature Review

The study conducted by (Srinivas, n.d.) evaluated committee reports from Narasimha,
merger economics, and bank merger milestones. They concluded that a merger causes
the stronger bank to become less profitable by piling on a sizable amount of non-
performing assets. According to (S. Singh & Das, 2018) Banks need to diversify into
new fund-based and non-fund-based sectors such as investing, mortgage financing,
and mutual funds banking to adjust to the declining global bank borrowings as a
percentage of GDP. A quicker and more affordable method of diversifying, expanding
geographically, and strengthening financial stability is through mergers and
acquisitions. To reduce risks and boost competitiveness, mergers were required in
India due to overstaffing and underutilization. Strategic consolidation was ensured by
government ownership, as demonstrated by mergers like the State Bank of India and
its affiliates. Experts have observed that for Indian banks to be globally competitive, a
rapid series of mega-mergers is necessary. According to an analysis by
(S. Singh & Das, 2018)
Basel-II rules and banking sector reforms in India force banks to improve
risk management in the face of growing competition. According to (Srinivas, n.d.),
takeovers are a practical tactic for healing ailing units, particularly when they are run
by reputable organizations. Notably, good management is associated with successful
turnarounds. According to the Narasimhan Committee Reports, (Gupta, n.d.) predicts
impending consolidation, with the State Bank of India and its affiliates, expected to
combine shortly, nationalized banks possibly combining into 4-5 entities, and private
sector banks possibly combining into 5 over the course of the next 5-7 years.
(Ghosh & Dutta, 2015)
argue that Indian banks' tiny size renders them inadequate for
international competition, and they support greater bank sizes for improved
competitiveness and survival prospects. According to (Khan, 2011) , India's
underserved and overbanked market lacks global reach, creating a profitability
conundrum and driving up customer prices. To improve, attain economies of scale,
maintain global competitiveness, lower costs, lower entry barriers, and open up new
markets, bank consolidation is essential. Nonetheless, (Aruna, n.d.) contends that
deregulation hasn't affected India's public sector banks' profitability, upholding
international norms for profitability. Mergers, however, may result in monopolistic
pricing that disadvantages consumers, while international banks use their size and
variety to gain access to the Indian market. In the face of fiercer competition,
(Liargovas & Repousis, 2011)emphasizes the need to have competent employees and
strong governance in larger banks. Post consolidation banks in Nigeria fight for talent
to meet growing demands for scale. Although larger asset sizes may not always
translate into higher return assets, (Prasad Samontaray et al., 2013) emphasize the
benefits of consolidation in Indian banking, including economies of scale, scope, and
product mix efficiency. (Aruna, n.d.) emphasizes the ongoing improvement of the
banking sector heeding the Narasimhan Committee’s advice, assuring depositors of
safety of stronger prudential rules. However, (Liargovas & Repousis, 2011)dispel the
myth that mergers are a source of corporate pleasure by demonstrating that
contemporary mergers mostly benefit above-average performing enterprises.
According to (Aggarwal & Garg, 2022) , globalization will increase competition in
Indian banking, requiring merger-enabling regulations. RBI assistance for private
sector bank consolidation is mentioned by (Kashyap, n.d.-a) , while
(Thakar, 2019)
emphasizes India's potential for top economic status with methodical growth.
(Vijayvargiya, 2020)talks about how mergers can provide organizational synergies as
well as market benefits, with a focus on brand architecture and strategy. In summary,
whereas market benefits and efficiency are provided by consolidation, obstacles still
exist in terms of success and regulatory backing. (Beccalli & Frantz, 2013) place a
strong emphasis on evaluating the external as well as internal benefits of mergers,
with shared branding promoting easier integration. (Goyal & Joshi, 2012) list eleven
post-acquisition rebranding possibilities to communicate vision and facilitate the
transition, emphasizing the significance of preserving several brands to maximize
market share. Leveraged buy-outs' suitability for mergers is examined by
(Ishwarya J, n.d.)
and Indian banking's advancement is found to be in line with Basel standards and
goals for financial stability (Bishnoi & Devi, 2015) However, according to
(Sinha et al., 2010)
mergers in India frequently fall short of achieving synergies and
synchronizing strategy, which reduces local shareholder value. (Jatkar, 2012) projects
heightened rivalry in the Indian and global banking markets, calling for calculated
international movements based on thorough market research. While
(Kushwah, 2015)
emphasizes the function of internet data rooms in boosting M&A efficiency,
(Kumar, 2013)describes the complexities of reverse mergers for revitalizing failing
businesses. Improved transparency is crucial for a company's reorganization to be
effective in the face of globalization (Ahmed et al., n.d.) .In the context of economic
liberalization, (Patel, 2014)examines debt reduction tactics for businesses. The
dynamics of negotiated mergers and their effect on shareholder value are covered
(Nayyar, 2007). (Hachem & Sujud, 2018) examine the consolidation trend and its
effects on the global steel industry. According to (Dutta MM & Dawn SK, n.d.) , there
has been a change in banking mergers from consolidation to acquisitions driven by
expansion. Generally, for mergers and acquisitions to be successful across industries,
a thorough understanding of market dynamics and strategic planning are essential.
The analysis of hostile mergers and buyouts by (Patel R & Shah D, 2016) focuses on
the tax benefits and accounting treatment. (Nagrani, n.d.) examines the effects of
concentration of mergers and acquisitions on productivity in the banking sector,
stability, and economic expansion, putting forth a connection between bank
concentration and competitive laws, tax structures, and legal efficacy. Inter-group
share transfers are covered by SEBI Takeover Regulations exclusions (Bajaj, 2009).
(Agarwal et al., 2019) evaluate India's readiness for mergers in light of international
trends, highlighting takeovers as the primary strategy. (Kashyap, n.d.-b) assesses the
State Bank of Hyderabad's performance as well as the expansion of commercial
banking in India, noting noteworthy advancements. In their warning against forced
bank mergers, (Radha et al., n.d.) point out the possibility of value degradation,
particularly in public sector institutions. According to (Bhalla, 2014), public sector
banks exhibit more consistency and lower risk when comparing the growth and bank
performance both prior to and during mergers. According to an analysis of market
advantages from mergers, (P. Singh, 2019) acquiring firms benefit.
(Singhal, n.d.)
examines how mergers affect operational performance, pointing out small
differences and possible inefficiencies. (Ambica, n.d.) explores shareholder wealth
effects and agency theory as they relate to managerial incentives in mergers.
According to (Kumar, 2013)acquiring organizations frequently experience losses as a
result of mergers, which typically don't boost profitability.
(Mamta & Assistance, 2014)
demonstrate how mergers of Malaysian banks improved performance after the
merger. According to (Sinha et al., 2010) , consolidation initiatives in Indian banking
are driven by regulatory norms and globalization, with strategic and financial
considerations playing a major role. In general, there are several factors to take into
account when merging banks, such as regulatory compliance, consequences on
shareholder value, tax considerations, and performance reviews following a merger.
(Gupta, n.d.) highlights how important it is to comprehend the effects of using shares
instead of cash to pay for acquisitions. It draws attention to the possible complications
and hazards that come with stock-based purchases, advises against undervaluing
shares, and supports acquirers who are confident in their ability to employ cash for
acquisitions. (Aruna, n.d.) explores how bank mergers and acquisitions affect
performance, with a special emphasis on Stopanska Banka AD Skopje's post-
acquisition performance following its acquisition by the National Bank of Greece.
The study examines the literature on the welfare implications of M&A activity,
market power, stock price, and banks' cost and profit efficiency.
(Prasad Samontaray et al., 2013)
examine how M&A activity might transform an business, with an
emphasis on on recent deals in the pharmaceutical sector. The study emphasizes how
crucial it is for investors to keep an eye on management to make sure they put
innovation and business value maximization ahead of M&A premiums.
(Vijayvargiya, 2020) looks at how stock returns behave during mergers and
acquisitions, focusing on how the target company's shareholders in India stand to gain
from the deal. To evaluate an M&A deal's efficacy in creating value, the article
emphasizes how crucial it is to examine the acquisition and target companies' points
of view. In the context of M&A activity, (Aggarwal & Garg, 2022) evaluate the
composition and output of the Indian pharmaceutical sector. The analysis concludes
that M&As had little effect on industry performance despite an increase in industry
concentration, pointing to a highly competitive market environment. (Thakar, 2019)
highlights the difficulties and traps connected with M&A operations despite their
prominence in the global business scene and addresses the reasons behind M&A
failures by building on previous studies. The significance of effective M&A
management for long-term competitive advantage is emphasized in the study
(Goyal & Joshi, 2012)
divide valuation strategies into three categories: asset-based, market-
based, and earnings-based. They also examine the reasoning behind mergers and
acquisitions. The study highlights the significance of effective valuation as well as the
function of M&A as an inorganic growth strategy. (Bishnoi & Devi, 2015) use logit
analysis to anticipate merger targets based on financial and product market variables.
They do this by analyzing the financial features of target and acquiring corporations
during mergers. According to the study, smaller companies with lower price-earnings
ratios are more likely to be targeted for acquisitions, which may be an indication of a
stock market undervaluation. (Jatkar, 2012) emphasize how crucial effective M&A
management is to Indian firms' growth and globalization plans. The article highlights
the importance of focused management in navigating the difficulties of M&A
transactions as it examines several methods for value capture and enhancement.
(Kushwah, 2015) divides banks into the public, private, and foreign sectors and uses
the CAMEL method to evaluate the banks' performance both before and after the
merger. The report sheds light on the impact of mergers on financial measures and
offers insights into the performance of various bank categories. Using the event
approach, (Patel, 2014) examines the returns to shareholders following merger
announcements in the Indian banking industry to evaluate the effects of mergers on
shareholder wealth. The study concludes that both bidder and target bank shareholder
wealth is positively and significantly impacted by merger announcements.
3. Conceptual Framework/ Research Gap

The banking industry is witnessing a surge in mergers and acquisitions due to the
challenges faced by government banks after demonetization, resulting in substantial
losses and non-performing loans. Discussions of potentially closing certain banks
pose a risk of mass withdrawals by the public. To address this, the government, in
collaboration with the RBI, has chosen to merge banks through large-scale operations
to enhance services, revenue, staff utilization, and cost-efficiency, and reduce NPAs.
This study aims to investigate this strategic initiative further.

3.1 Development of Hypotheses

The hypothesis in this study revolves around assessing the impact of mergers and
acquisitions (M&A) on the financial performance of selected banks.

Null Hypothesis (H0): "There would be no significant difference in the mean score of
selected units, before and after the merger and acquisition." This statement implies
that the M&A activities undertaken by the government and RBI in the banking sector
would not lead to any substantial changes in the financial performance metrics of the
selected banks. Essentially, it suggests that merging banks doesn't significantly alter
their financial performance indicators such as profitability, liquidity, asset quality, etc.

Alternate Hypothesis (H1): "There would be a significant difference in the mean score
of selected units, before and after the merger and acquisition." The alternate
hypothesis contradicts the null hypothesis. It suggests that there will be significant
changes in the financial performance metrics of the selected banks following the
mergers and acquisitions. This implies that M&A activities would have a tangible
impact on the financial health of the banks involved.

The study aims to use statistical methods such as ratio analysis and paired sample T-
tests to analyze the data and evaluate whether there is sufficient evidence to reject the
null hypothesis in favor of the alternate hypothesis. If the alternate hypothesis is
supported, it would imply that the M&A strategies implemented by the government
and RBI have had a significant impact on the financial performance of the banking
sector.

4. Research Methodology/ Research Design

4.1 Problem statement

The banking industry is witnessing a surge in mergers and acquisitions due to the
challenges faced by government banks after demonetization, resulting in substantial
losses and nonperforming loans. Discussions of potentially closing certain banks pose
a risk of mass withdrawals by the public. To address this, the government, in
collaboration with the RBI, has chosen to merge banks through large-scale operations
to enhance services, revenue, staff utilization, and cost-efficiency, and reduce NPAs.
This study aims to investigate this strategic initiative further.

4.2 Research objective

4.2.1 To examine Bank of Baroda's financial performance before and after the merger

4.2.2 To examine Punjab National Banks' financial performance before and after the
merger

4.2.3 To examine Canara Bank's financial performance before and after the merger

4.2.4 To examine Union Bank’s financial performance before and after the merger

4.2.5 To examine Indian Bank’s financial performance before and after the merger of
the

4.3 Sources of data collection

4.3.1 The study's sole source of secondary data is the annual reports of certain units as
well as other websites.

4.3.2 Published papers, reports, articles, books, magazines, newspapers, and other
periodicals have been the primary sources of all the information about the history,
expansion, and development of certain banking businesses.

4.4 Tools of analysis

4.4.1 The statistical instrument applied in this investigation is SPSS software.

4.4.2 The Paired Sample T-test and Ratio Analysis form the foundation of this
investigation.

5. Analysis and Results

5.1 operating profit ratio

The Operating Profit Ratio determines the operational efficiency of a business by

comparing its operating profit to net sales, which includes non-operating revenue but
excludes non-operating expenses.
 TABLE 1

1. OPERATING PROFIT RATIO 0

BEFORE &AFTER MERGER

BANK NAME BEFORE MERGER AFTER MERGER DIFFERENCE SQUARE OF DIFFERENCE -5 Bank Of Punjab Canara Union Indian
Baroda National Bank Bank Of Bank
-10 Bank India
(x) (y) (x-y) (x-y)^2 -15 -11.77 -13.3
Bank Of Baroda -20.82 -11.77 -9.05 81.9025 -20 -16.61
-25 -20.82 -20.53
Punjab National Bank -33.81 -16.61 -17.2 295.84 -23.55 -22.83
-23.24
-30 -26.19
Canara Bank -13.3 -20.53 7.23 52.2729 -35
-33.81
-40
Union Bank Of India -23.24 -23.55 0.31 0.0961
Indian Bank -26.19 -22.83 -3.36 11.2896
BANK NAME
Total -22.07 441.4011
BEFORE MERGER (x) AFTER MERGER (y)

(SOURCE: Moneycontrol.com)

Following the merger, the Operating Profit Ratios of Bank of Baroda and Punjab
National Bank declined from -20.82 and -11.77, respectively, to 16.61 and -33.81. On
the other hand, after the merger, Canara Bank's ratio increased from -13.3 to -20.53.
But following the merger, the ratios of Indian Bank and Union Bank of India dropped
from -26.19 to -22.83 and -26.19 to -22.83, respectively. These numbers show the
various effects of mergers on the banking industry's operational effectiveness.

TABLE 1.1

Analysis of t-test in selected units under the study of operating profit ratio
Means S.D d.f t-test p-values result

x y xy x y xy
-23.472 -19.058 -4.41 7.496971 4.89082 9.27 4 -1.064 0.374 Ho

 Null Hypothesis: (Ho)

There would be no significant difference in the mean score of selected units, before
and after merger and acquisition.

 Alternate Hypothesis: (H1)

There would be significant differences in the mean score of selected units, before and
after merger and acquisition.

At 5% level of significance, here t= -1.064 and p-value = 0.347

So, t<p
As t is less than the p value so Null Hypothesis (Ho) is accepted means there is no
significant difference in the mean score of selected units, before and after the merger
and acquisition.

5.2 Net profit ratio

The Net Profit Ratio evaluates an organization's profitability after taxes on sales,
providing information on performance and effective working capital utilization.
However, non-cash expenses prevent this metric from accurately reflecting cash
flows.

TABLE 2

2.NET PROFIT RATIO

BANK NAME BEFORE MERGER AFTER MERGER DIFFERENCE SQUARE OF DIFFERENCE
(x) (y) (x-y) (x-y)^2
Bank Of Baroda -5.57 0.87 -6.44 41.4736
Punjab National Bank -19.44 0.62 -20.06 402.4036
Canara Bank 0.74 -4.56 5.3 28.09
Union Bank Of India -8.54 -8.11 -0.43 0.1849
Indian Bank -13.6 -6.98 -6.62 43.8244
Total -28.25 515.9765

Better profitability was indicated by Bank of Baroda's Net Profit Ratio, which rose
from -5.57 before the merger to 0.87 following it. Following the merger, Punjab
National Bank's ratio increased from 19.44 to 0.62, indicating improved financial
performance. Following the merger, Canara Bank's ratio dropped from 0.74 to -4.56,
indicating difficulties with profitability trends. The ratio of Union Bank of India
changed from 8.54 before the merger to -8.11 following it, suggesting a significant
effect on profitability.

TABLE 2.1

Analysis of t-test in selected units under the study of Net profit ratio
Means S.D d.f t-test p-values result

x y xy x y xy
-9.282 -3.632 5.65 7.690905 4.197329 9.438 4 -1.338 0.252 Ho

 Null Hypothesis: (Ho)

There would be no significant difference in the mean score of selected units, before
and after merger and acquisition.

 Alternate Hypothesis: (H1)

There would be significant differences in the mean score of selected units, before and
after the merger and acquisition.

At 5% level of significance, here t= -1.338 and p-value = 0.252

So, t<p

As t is less than the p value so Null Hypothesis (Ho) is accepted means there is no
significant difference in the mean score of selected units, before and after the merger
& and acquisition.

5.3 Return on asset

Return on Assets (ROA) is a key metric for evaluating operational effectiveness and
financial health in the banking industry is the company's asset efficiency and
profitability, which is calculated by dividing net income by total assets.

TABLE 3
3. RETURN ON ASSETS
BANK NAME BEFORE MERGER AFTER MERGER DIFFERENCE SQUARE OF DIFFERENCE
(x) (y) (x-y) (x-y)^2
Bank Of Baroda -0.33 0.05 -0.38 0.1444
Punjab National Bank -1.28 0.04 -1.32 1.7424
Canara Bank 0.04 -0.3 0.34 0.1156
Union Bank Of India -0.58 -0.56 -0.02 0.0004
Indian Bank -0.88 -0.45 -0.43 0.1849
Total -1.81 2.1877

Following the merger, Bank of Baroda's return

on assets (ROA) climbed from -0.33 to 0.05, suggesting greater asset utilization and
return generation. Following the merger, Punjab National Bank's ratio increased from
1.28 to 0.04, indicating improved efficiency in using assets for returns. After the
merger, Canara Bank's ratio dropped from 0.04 to -0.03, indicating difficulties with
asset utilization efficiency. The ratio of Union Bank of India changed from 0.58
before the merger to -0.56 following it, suggesting a significant effect on return
generation and asset utilization

TABLE 3.1
 Analysis of t-test in selected units under the study of Return On Asset Ratio
Means S.D d.f t-test p-values result

x y xy x y xy
-0.606 -0.244 0.147864 -0.362 0.279517 0.61897 4 -1.308 0.261 Ho

 Null Hypothesis: (Ho)

There would be no significant difference in the mean score of selected units, before
and after merger and acquisition.

 Alternate Hypothesis: (H1)

There would be significant differences in the mean score of selected units, before and
after the merger and acquisition.

At 5% level of significance, here t= -1.308 and p-value = 0.261

So, t<p

As t is less than the p-value so Null Hypothesis (Ho) is accepted means there is no
significant the difference in mean score of selected units, before and after merger &
acquisition.

5.4 Return on equity

Return on Equity (ROE), is a bank's ability to create returns for investors is gauged by
its return on equity (ROE), which is calculated by dividing net income by shareholder
equity. A ROE of 10% or higher is generally considered indicative of solid
shareholder returns and sustained value generation.

TABLE 4

4. RETURN ON EQUITY
BANK NAME BEFORE MERGER AFTER MERGER DIFFERENCE SQUARE OF DIFFERENCE
(x) (y) (x-y) (x-y)^2
Bank Of Baroda -5.56 0.94 -6.5 42.25
Punjab National Bank -24.2 0.58 -24.78 614.0484
Canara Bank 1.16 -6.78 7.94 63.0436
Union Bank Of India -11.92 -10.16 -1.76 3.0976
Indian Bank -15.66 -7.88 -7.78 60.5284
Total -32.88 782.968

Following the merger, Bank of Baroda's return on equity (ROE) improved, rising
from -5.60 to 0.94, which represents better return creation for shareholders. Following
the merger, the ratio for Punjab National Bank increased from 24.20 to 0.58, showing
improved profitability and return generation. Following the merger, Canara Bank's
ratio dropped from 1.16 to -6.78, indicating difficulties in producing shareholder
returns. The ratio of Union Bank of India changed significantly after the merger,
going from -11.92 pre-merger to -10.16 post-merger.

TABLE 4.1

Analysis of t-test in selected units under the study of Return On Equity Ratio
Means S.D d.f t-test p-values result

x y xy x y xy
-11.236 -4.66 -6.58 7.49 5.097313 11.9 4 -1.237 0.284 Ho

 Null Hypothesis: (Ho)

There would be no significant difference in the mean score of selected units, before
and after merger and acquisition.

 Alternate Hypothesis: (H1)

There would be a significant difference in the mean score of selected units, before and
after merger and acquisition.

At 5% level of significance, here t= -1.237 and p-value = 0.284

So, t<p

As t is less than the ` p-value so Null Hypothesis (Ho) is accepted means there is no
significant the difference in mean score of selected units, before and after merger &
acquisition.

5.5 Cost to income ratio

The Cost to Income Ratio is a key performance indicator for businesses, especially in
banking and microfinance, the Cost to Income Ratio compares operating costs to
income to evaluate operational efficiency. A lower ratio denotes greater efficiency.

TABLE 5

5. COST OF INCOME RATIO

BANK NAME BEFORE MERGER AFTER MERGER DIFFERENCE SQUARE OF DIFFERENCE
(x) (y) (x-y) (x-y)^2
Bank Of Baroda 48.92 43.41 5.51 30.3601
Punjab National Bank 58.8 41.81 16.99 288.6601
Canara Bank 38.78 40.83 -2.05 4.2025
Union Bank Of India 45.76 46.11 -0.35 0.1225
Indian Bank 40.72 41.12 -0.4 0.16
Total 19.7 323.5052
The cost-to-income ratio of Bank of Baroda dropped after the merger, from 48.92 to
43.41, demonstrating better cost control. Following the merger, Punjab National
Bank's ratio decreased from 58.80 to 41.81, indicating improved efficiency. After the
merger, Canara Bank's ratio marginally increased from 38.78 to 40.83, indicating a
possible problem. Union Bank of India's ratios were 45.76 pre-merger and 46.11 post-
merger, suggesting no change, whereas Indian Bank's ratios increased slightly from
40.72 to 41.12 post-merger, indicating slight modifications.

TABLE 5.1

Analysis of t-test in selected units under

Means S.D d.f t-test p-values result

x y xy x y xy
46.596 42.656 3.94 7.916039 2.174162 7.84 4 1.124 0.324 H1

 Null Hypothesis: (Ho)

There would be no significant difference in the mean score of selected units, before and after
merger and acquisition.

 Alternate Hypothesis: (H1)

There would be significant differences in the mean score of selected units, before and after
the merger and acquisition.

At 5% level of significance, here t= 1.124 and p-value = 0.324

So, t>p

As t is less than the p-value so Null Hypothesis (Ho) is accepted means there is a significant

the difference in mean score of selected units, before and after merger & acquisition.

4.6 Earning per share

Earnings Per Share (EPS) evaluates a company's profitability per share and highlights
the role that capital efficiency plays in producing profits, driving share prices, and
revealing overall performance.

TABLE 6
6. EARNING PER SHARE
BANK NAME BEFORE MERGER AFTER MERGER DIFFERENCE SQUARE OF DIFFERENCE
(x) (y) (x-y) (x-y)^2
Bank Of Baroda -64.97 -46.7 -18.27 333.7929
Punjab National Bank -30 1 -31 961
Canara Bank 8 -24 32 1024
Union Bank Of India -25 -13 -12 144
Indian Bank -29 -9 -20 400
Total -49.27 2862.7929
The EPS of Bank of Baroda showed a relative improvement, going from -64.97 pre-
merger to -46.70 post-merger. With a post-merger ratio of 1.00 compared to a pre-
merger ratio of 30.00, Punjab National Bank experienced a notable increase. Canara
Bank experienced difficulties after the merger, as seen by its EPS fall from 8.00 pre-
merger to -24.00 post-merger.

TABLE 6.1

Analysis of t-test in selected units under the study of Earning Per Share Ratio
Means S.D d.f t-test p-values result

x y xy x y xy
-28.194 -18.34 -9.85 25.8679 18.20791 24.37 4 -0.904 0.417 Ho

 Null Hypothesis: (Ho)

There would be no significant difference in the mean score of selected units, before
and after merger and acquisition.

 Alternate Hypothesis: (H1)

There would be a significant difference in the mean score of selected units, before and
after merger and acquisition.

At 5% level of significance, here t= -0.904 and p-value = 0.417

So, t<p

As t is less than the p-value so Null Hypothesis (Ho) is accepted means there is no
significant the difference in mean score of selected units, before and after merger &
acquisition.

4.7 Debt equity ratio

The Debt Equity Ratio evaluates a company's financing strategy and risk profile by
comparing its total liabilities to its total shareholders' equity. This reveals the
company's financial leverage and risk level.

TABLE 7
 7. DEBT EQUITY RATIO
BANK NAME BEFORE MERGER AFTER MERGER DIFFERENCE SQUARE OF DIFFERENCE
(x) (y) (x-y) (x-y)^2
Bank Of Baroda 15.07 15.37 -0.3 0.09
Punjab National Bank 17.36 13.09 4.27 18.2329
Canara Bank 21.53 20.27 1.26 1.5876
Union Bank Of India 18.92 16.44 2.48 6.1504
Indian Bank 15.6 14.71 0.89 0.7921
Total 8.6 26.853

A slight change in the financing balance is reflected in the Bank of Baroda's Debt
Equity Ratio, which climbed slightly from 15.07 before the merger to 15.37 following
it. Following the merger, Punjab National Bank's ratio dropped from 17.36 to 13.09,
suggesting a shift towards more cautious funding. Following the merger, Canara
Bank's and Union Bank of India's ratios decreased, from Canara Bank's 21.53 to 20.27
and from 18.92 to 16.44, respectively, indicating attempts to reduce dependence on
debt. Following the merger, Indian Bank's ratio dropped from 15.6 to 14.71,
suggesting a move towards a more cautious financing strategy.

TABLE 7.1

Analysis of t-test in selected units under the study of Debt Equity Ratio

Means S.D d.f t-test p-values result

x y xy x y xy
17.696 15.976 1.72 2.626772 2.690387 1.73 4 2.215 0.091 H1

 Null Hypothesis: (Ho)

There would be no significant difference in the mean score of selected units, before
and after merger and acquisition.

 Alternate Hypothesis: (H1)

There would be significant differences in the mean score of selected units, before and
after the merger and acquisition.

At 5% level of significance, here t= 2.215 and p-value = 0.091

So, t>p

As t is less than the p-value so Null Hypothesis (Ho) is accepted means there is a
significant the difference in mean score of selected units, before and after merger &
acquisition.
5.8 ROCE ratio

Return on Capital Employed (ROCE) evaluates a company's capacity to generate

returns on capital used; it is computed by dividing EBIT by capital used, which shows
profitability and efficient use of capital.

TABLE 8

8. RETURN ON CAPITAL EMPLOYED

BANK NAME BEFORE MERGER AFTER MERGER DIFFERENCE SQUARE OF DIFFERENCE
(x) (y) (x-y) (x-y)^2
Bank Of Baroda 1.72 1.78 -0.06 0.0036
Punjab National Bank 1.69 1.81 -0.12 0.0144
Canara Bank 1.56 1.32 0.24 0.0576
Union Bank Of India 1.54 1.7 -0.16 0.0256
Indian Bank 1.78 2.14 -0.36 0.1296
Total -0.46 0.2308

Following the merger, Bank of Baroda's ROCE increased from 1.72 to 1.78,
indicating a little improvement in efficiency. The pre-merger ratio of Punjab National
Bank increased somewhat to 1.81 after the merger, suggesting improvements in
profitability. The ROCE of Canara Bank dropped from 1.56 before the merger to 1.32
following it, indicating difficulties with capital efficiency. Union Bank of India's
return generation improved somewhat after the merger, rising from 1.54 pre-merger to
1.70 post-merger. Indian Bank's return on capital employed (ROCCE) significantly
improved after the merger, rising from 1.78 pre-merger to 2.14 post-merger.

TABLE 8.1

Analysis of t-test in selected units under the study of ROCE Ratio

 Means S.D d.f t-test p-values result

x y xy x y xy
1.658 1.75 -0.092 0.104019 0.293258 0.217 4 -0.948 0.397 Ho

 Null Hypothesis: (Ho)

There would be no significant difference in the mean score of selected units, before
and after merger and acquisition.

 Alternate Hypothesis: (H1)

There would be significant differences in the mean score of selected units, before and
after the merger and acquisition.

At 5% level of significance, here t= -0.948 and p-value = 0.397

So, t<p

As t is less than the p value so Null Hypothesis (Ho) is accepted means there is no
significant difference in the mean score of selected units, before and after the merger
& and acquisition.

5.9 Assets turnover ratio

The Asset Turnover Ratio is Measured by dividing sales revenue by total assets, it
evaluates how well a business uses its assets to create revenue and is important for
assessing both financial success and operational efficiency.

TABLE 9

9, ASSET TURNOVER RATIO

BANK NAME BEFORE MERGER AFTER MERGER DIFFERENCE SQUARE OF DIFFERENCE
(x) (y) (x-y) (x-y)^2
Bank Of Baroda 0.06 0.07 -0.01 0.0001
Punjab National Bank 0.07 0.07 0 0
Canara Bank 0.07 0.07 0 0
Union Bank Of India 0.07 0.07 0 0
Indian Bank 0.07 0.07 0 0
Total -0.01 0.0001

In the examination of the Asset Turnover Ratios for the specified banks, distinct
patterns emerge before and after their respective mergers. Bank of Baroda
experienced a slight increase in its Asset Turnover Ratio, rising from a lower pre-
merger ratio of 0.06 to a slightly higher post-merger ratio of 0.07. This indicates a
minor improvement in the bank's efficiency in utilizing its assets to generate revenue
following the merger. Punjab National Bank, Canara Bank, Union Bank of India, and
Indian Bank all maintained equal Asset Turnover Ratios before and after their
respective mergers. This stability suggests that these banks maintained a consistent
level of efficiency in converting their assets into revenue, with no significant changes
observed in their asset utilization efficiency.

TABLE 9.1

Analysis of t-test in selected units under the study of Assets Turnover ratio
Means S.D d.f t-test p-values result

x y xy x y xy
0.068 0.07 -0.002 0.004472 0 0.004 4 -1 0.374 Ho

 Null Hypothesis: (Ho)

There would be no significant difference in the mean score of selected units, before
and after merger and acquisition.

 Alternate Hypothesis: (H1)

There would be significant differences in the mean score of selected units, before and
after merger and acquisition.

At 5% level of significance, here t= -1.000 and p-value = 0.374

So, t<p

As t is less than the p value so Null Hypothesis (Ho) is accepted means there is no
significant difference in the mean score of selected units, before and after the merger
& and acquisition.

4.10 CASA ratio

CASA ratio represents a crucial indicator in the banking industry of a bank's capacity
to draw in and hold onto low-cost deposits, which in turn affects its profitability and
cost efficiency, is the ratio of deposits in Current Accounts and Savings Accounts to
total deposits.

TABLE 9.10

10. CURRENT ACCOUNT AND AVING ACCOUNT RATIO (CASA)

BANK NAME BEFORE MERGER AFTER MERGER DIFFERENCE SQUARE OF DIFFERENCE
(x) (y) (x-y) (x-y)^2
Bank Of Baroda 35.81 35.03 0.78 0.6084
Punjab National Bank 42.16 42.97 -0.81 0.6561
Canara Bank 29.18 31.37 -2.19 4.7961
Union Bank Of India 35.97 35.46 0.51 0.2601
Indian Bank 35.9 36.51 -0.61 0.3721
Total -2.32 6.6928
The CASA ratio of Bank of Baroda showed a slight decline, going from 35.81 before
the merger to 35.03 following it. Following the merger, Punjab National Bank's ratio
rose from 42.16 to 42.97, showing better low-cost deposit retention. After the merger,
Canara Bank's ratio increased from 29.18 to 31.37, indicating a better capacity to
obtain low-cost deposits. The ratio of the Union Bank of India dropped.

TABLE 10
Means S.D d.f t-test p-values result

x y xy x y xy
35.804 36.268 -0.464 4.591103 4.217561 1.184 4 -0.876 0.431 Ho

 Null Hypothesis: (Ho)

There would be no significant difference in the mean score of selected units, before
and after merger and acquisition.

 Alternate Hypothesis: (H1)

There would be significant differences in the mean score of selected units, before and
after merger and acquisition.

At 5% level of significance, here t= -0.948 and p-value = 0.397

So, t<p

As t is less than the p value so Null Hypothesis (Ho) is accepted means there is no
significant difference in the mean score of selected units, before and after the merger
& and acquisition.

6. Discussion

6.1 Success Factors: Exploring the factors contributing to the success or failure of
M&A activities in the banking sector is essential. Factors such as cultural
integration, management effectiveness, and customer retention strategies can
influence the outcome of mergers and acquisitions.
6.2 Regulatory Considerations: Regulatory frameworks play a crucial role in shaping
M&A activities in the banking sector. Discussions should delve into the regulatory
landscape to understand how regulatory changes impact the feasibility and success
of M&A transactions.
6.3 Stakeholder Management: Effective stakeholder management is vital throughout
the M&A process. Banks and policymakers need to consider the interests of
various stakeholders, including shareholders, employees, customers, and
regulators, to ensure smooth integration and maximize value creation.
6.4 Risk Management: Mergers and acquisitions entail inherent risks, including
integration challenges, cultural differences, and financial instability. Discussions
should focus on robust risk management strategies to mitigate these risks and
enhance the likelihood of M&A success.

7. Implications

7.1 Financial Performance: The findings suggest that mergers and acquisitions
have led to changes in various financial performance metrics among the
selected banks. Understanding these changes can help policymakers and bank
management make informed decisions regarding future M&A activities.
7.2 Cost Efficiency: The study indicates increased levels of cost efficiency post-
merger. This implies that M&A activities might have resulted in streamlining
operations and reducing redundant costs, which could positively impact the
overall financial health of the merged banks.
7.3 Shareholder Value: M&A activities can affect shareholder value significantly.
The study underscores the importance of assessing how structural elements
such as relative sizes of merging partners and financing methods influence
shareholder value.
7.4 Market Competition: Mergers and acquisitions can impact market
competition. Policymakers must balance the benefits of market consolidation
with potential downsides such as reduced competition, which could lead to
negative consequences for consumers.
7.5 Global Competitiveness: Merging with larger, more powerful banks can
enhance the competitiveness of smaller institutions in the global market. This
suggests that M&A activities may be strategic for banks aiming to strengthen
their position in the increasingly competitive global financial landscape.

8. Limitations and future research directions

8.1 Data Limitations: The study relies on secondary data sources, which may have
limitations in terms of accuracy and completeness. Future research could benefit
 from using primary data sources or incorporating alternative data collection
methods to enhance the robustness of findings.

8.2 Generalizability: The findings are based on a specific set of banks and may not be
generalizable to the entire banking sector. Future research could explore M&A
activities across a broader range of banks to provide more comprehensive insights
into the implications of consolidation in the banking industry.

8.3 Long-Term Effects: The study primarily focuses on short-term financial

performance metrics. Future research could investigate the long-term effects of
mergers and acquisitions on banks' financial health, market competitiveness, and
overall sustainability.

8.4 Qualitative Analysis: Incorporating qualitative analysis, such as interviews or case

studies, could provide deeper insights into the motivations, challenges, and
outcomes of M&A activities in the banking sector.

8.5 Cross-Country Comparison: Comparing M&A activities and their impacts across
different countries and regulatory environments could offer valuable insights into best
practices and lessons learned in the banking sector.

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