Effectiveness of Consolidation of Bank of Baroda: An Empirical Study

Abstract

Consolidation through Merger & Acquisition is not a new phenomenon in the Indian banking space. After the adoption of the Basel-III norms by the RBI in 2013, the process of consolidation became more relevant and imperative in the Indian banking sector. Under such situations, study on effectiveness of the ongoing consolidation drive has become necessary. With this end in view, the paper attempt to highlight the effectiveness of Merger & Acquisition on the profitability of Bank of Baroda. The study is based on the secondary data collected from various sources for the period 2015-16 to 2022-23. ROE of Bank of Baroda is measured by using extended Dupont analysis. Furthermore, paired t test have been applied to determine whether there exists any significant difference among the drivers of ROE during the pre and post-merger period of Bank of Baroda. The Extended Dupont analysis revealed that though there was an increase in ROE during the post-merger period; Asset Turnover and Tax Burden were found to be lower than that of pre-merger period. Paired t-test pointed out that there was no significant difference in ROE during the pre-and post-merger periods. Additionally, among the five drivers of ROE, only operating margin was found to have a significant difference during the pre-and post-merger periods. The present study will help to provide an insight into the profitability of the merger of India’s third largest public sector banks in India.