Moneycontrol
Feb 18, 2017 11:28 AM IST | Source: CNBC-TV18

Kotak-Axis combine would possess Rs 8 lakh crore in assets: CLSA

Despite denials from both Kotak Mahindra and Axis Bank, the rumours of a merger have seen shares of the private lenders rise 3.38 percent and 8.31 percent, respectively, over the past month.


As buzz continues about a possible merger between Axis Bank and Kotak Mahindra Bank, global brokerage firm CLSA has said it would be a positive development that would create one of India’s largest private banks, reports CNBC-TV18.


In a note released on Friday, CLSA said the combined entity would have around Rs 8 lakh crore in assets with 6 percent share of loans.


While a merger would eliminate branch duplication and unlock synergies, there would be higher credit costs and integration challenges, CLSA said.


Seeing a share swap ratio of 0.6:1 for Axis Bank, the brokerage firm said the immediate concern in the event of a merger would be Kotak’s return on equity (RoE) expansion plans getting delayed.

Also read: COMMENT: Kotak & Axis - good together or better alone?


CLSA currently has an outperform rating on both Axis Bank and Kotak Mahindra Bank with a target price of Rs 550 and Rs 920, respectively. 


Despite denials from both Kotak and Axis, the rumours of a merger have seen shares of the private lenders rise 3.38 percent and 8.31 percent respectively.

While Axis Bank called these reports “baseless speculation”, Kotak Mahindra Bank’s founder Uday Kotak said the lender does not comment on market speculation, but added he is open to various options.

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