SBI associate banks climb on acquisition reports

State Bank of India (SBI) associate banks namely  State Bank of Bikaner and Jaipur (SBBJ); State Bank of Mysore (SBM); and State Bank of Travancore (SBT) are three banks which are listed on bourses and have shown good amount of volatility in trade on Wednesday after reports were circulated in media on acquisition of the five associate banks by SBI.

While analysts feel the acquisition of the associate banks of SBI by SBI itself is net positive for all the banks involved, State Bank of Bikaner and Jaipur bucked the trend and closed down by almost 2.63 percent at Rs. 493.80 per share.

State Bank of Mysore was the biggest gainer in the pack gaining almost 10.90 percent from its Tuesday's close. The counter closed at Rs. 470 per share.

State Bank of Travancore while trading firm throughout the session lost some ground in the second half of the session managing to close at Rs. 406 per share, up by almost 0.8 percent. State Bank of India shares climbed up by 1.78 percent at Rs. 180 per share.

The other two associate banks of SBI, State Bank of Hyderabad and State Bank of Patiala are not listed.SBI will also be acquiring state-run Bharatiya Mahila Bank which aims to lend women borrowers.

Analysts feel the valuation may be cheaper for the SBI associate banks, but merging operations will not be easy and there will be challenges and opposition from the employee unions.The merger does not promise the NPAs and stressed assets to be nullified post acquisition for SBI, as the percentage of stressed assets to total assets is higher for these smaller state owned banks.

Investors may stick to efficient private banking names touching their 52 week highs like HDFC Bank, Yes Bank and IndusInd Bank.