Buy Bank of Baroda, Dena Bank, Vijaya Bank shares at any correction: Analyst

Nearly after two years post-State Bank of India (SBI) merger with associate banks, Modi government has announced another mega merger of three Private Sector Banks (PSBs). The Bank of Baroda (BoB), Dena Bank and Vijaya Bank will enter into an equity swap to strengthen their portfolio. The new merger has raised so many questions for investors. 

The shareholders of Vijaya Bank will get 402 equity shares of Bank of Baroda for every 1,000 shares they posses, while Dena Bank's shareholders will get 110 Bank Of Baroda shares for every 1,000 shares they hold.

Talking on the merger matter, Avinash Gorakshakar, research analyst, told Zee Business Online, "Bank of Baroda is likely to be benefited from this merger, however, there will be people management challenges in the initial phases as well." 

Whether there will be opportunities for new investors or not? Whether it's the right time to add these stocks to your portfolio? Or one should wait for the final implementation of the merger? Which bank is going to be benefited the most? How does it create an opportunity for a short-term investor? What will be the challenges for bank officials? Check the answers here:-

1. Is short-term investment right? 

Simi Bhaumik, an equity research analyst, told Zee Business online,"The investors should not eye any long-term buying in these shares as the consolidated numbers are still not out". 

"Short-term investors can prefer buying all three shares at any correction. Investors can look forward to one or two month targets.'' Bhaumik added.

2. Which bank is better to bank upon?

For Bank Of Baroda, the merger will be beneficial as it will make it India's third-largest bank with a market share of 6.9 per cent and 7.4 per cent of advances and deposits respectively. 

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3. Is there any other option?

"The PSU banks are on a bullish note, technically. All three banks are looking consolidated on charts. A 2-month range is fine for short-term targets. However, I personally own SBI in my portfolio and consider it as the best PSU for a long-term investment" Bhaumik said.

On Thursday, at 15.20 hrs, Vijaya Bank was trading at Rs 47.40, down by 3.65 points or 7.15 per cent. Bank of Baroda was in green at Rs 119.45, up by 0.10 points or 0.08 per cent. While Dena Bank was the weakest among three, falling over 19 per cent to Rs 14.45.

However, Gorakshakar said, "I would not suggest buying any of these, as investors should wait further for a consolidated balance sheet of April 2020. SBI merger was a better one in comparison."

Asset quality of Dena Bank is bad at 20 per cent, the overall asset quality write off figure will be watchful." explained Gorakshakar. 

Note: The experts are not associated with any of the above shares or companies.