Analysis of Financial and Operational Performance of Banking Sector Consolidations: Indian Case Study with Mergers and Acquisition

Abstract

The present paper analyses the impact of M&As on productivity and profitability of consolidation in the Indian Banking sector. It examines the performance of the two banks based on the financial ratios in the pre and post-merger period. The collection of data covers financial performance of selected banks from 2004-05 to 2014-15. The statistical tools are arithmetic mean, standard deviation, t-test, and p-value etc. to analyze the various financial ratios before and after the mergers. 14 ratios are used to compare pre and post-merger financial performance evaluation of consolidated banks. The analysis of ICICI Bank concluded that Net Profit Margin, Operating Profit Margin, Return on Capital Employed, Return on Net Worth, Interest Coverage, Deposit per Employee, and Credit Deposit Ratio have shown an improvement after the merger but in case of other parameters there is no significant improvement in the performance. The analysis of State Bank of India reveals there is no significant improvement after the merger. The study indicates that the banks have been positively affected when distinguished between pre-mergers and post-merger period.

Keywords: Profitability, Efficiency, Merger and Acquisitions, Financial Ratios

View PDF