We hope that this merger will set an example for other mergers

Sun, Mar 30, 2014 12:00 AM on Others,

Within the next couple of weeks, the Nepali financial sector will see the emergence of the second largest bank

in terms of capital base following the merger between Commerz and Trust Bank Nepal and Global IME Bank.

The two banks are waiting for the final approval for merger from the regulator — Nepal Rastra Bank. Dikshya Singh of The Himalayan Times caught up with CEO of Commerz and Trust Bank Nepal Anal Raj Bhattarai, who will be stepping down from his position following the merger, to talk about the merger, its complication and benefits, overall banking sector and regulator’s role among others. Excerpts:

Why did your bank opt for a merger with Global IME Bank? And what will become of Commerz and Trust Bank Nepal?

We sought the merger to grow bigger. In the present market scenario, we found Global IME to be the most suitable. Commerz and Trust Bank will become Global IME Bank Nepal and we decided to let go of the name because it would have created unnecessary hassles of changing names at international accounts. Following the merger, we will become the second largest bank in terms of capital, with Rs 4.1 billion as paid up and will also be among the top five in terms of deposit and lending. Moreover, we will have the advantage of scale, for example, single obligor limit of the merged entity will be near Rs one billion.

How difficult has the whole process been?

We hope this merger will set an example for other mergers as we came together voluntarily and everything happened so swiftly. The merger has neared conclusion within five months since talks started formally. Most importantly, egos of both entities did not come in between. I believe, my decision to quit as CEO also helped smoothen the deal.

What are your plans now?

I have some offers and will decide about future steps in the next few months. But it is unlikely that I will leave banking any time soon. I began my career from Nepal Bank Ltd two decades ago. Since then, the sector has improved and is now well regulated. NRB has taken important steps to make the banking sector stable.

How has the short cycles of liquidity affected banks?

Short liquidity cycles and fluctuating interest rates have created difficulties in long-term planning not only for the banks but also for businesses. The volatility in interest rates makes estimating cost of production tricky for any business. Banks have the problem of asset-liability mismatch as our assets or loans are of long-term nature while the liabilities or deposits are of short-term. That is why banks can easily increase or decrease deposit rates but it takes longer to change the lending rate. However, with the new government in place, industrial demand is rising. I hope things will improve soon.

Do you agree with NRB’s recent move of fixing interest spread and possible cap on service fee?

There is a thin line between regulating and controlling and sometimes some actions overstep those lines. In terms of service charge, unnecessarily charging customers for closing bank accounts and other similar actions have to be stopped, but then, banks have to incur some expenses in providing cards, internet or SMS banking services and they should be allowed to charge a nominal fee for that. As for fixing interest spread, it seems a bit odd that such a limit should be in place when we have embraced free market mechanism.

Source: THT