Hvis Lån & Spar fusionerer med Skjern Bank
Student thesis: Master Thesis and HD Thesis
- Kasper Beyer Ravn
2. semester, Graduate Diploma in Business Administration (Financial Planning) (Diploma Programme)
The main purpose of this paper is to determine, whether it is an economic advantage for the shareholders of Lån & Spar, if the bank were to merge with Skjern Bank.
Both banks have been seriously affected by the crisis of credit. Especially Skjern Bank has had a rough time due to high losses on bad loans. It is essential that these high losses stop in order to make the merger a success for the shareholders.
The major benefit of the merger is lower costs. This is done by a general trimming of the joint company which would include a reduction in employment due to synergies. My calculations predict that the annual result of the merged bank will be approximately 83 mill. DKK. In 2010 the result of Lån & Spar was only 43.7 mill. DKK. Even though there will be more shareholders to share this result after the merger, this is still a significantly better result.
A better result means that the bank can achieve minor growth without loss of solvency. Before a merger this wouldn’t be possible. So the situation improves, but is still not as good as the shareholders could hope for. At the same time Lån & Spar’s result will not be as badly affected by an increasing interest rate, as they will be now. Funding costs will, however, become a little higher. But bearing in mind the low consequences of increasing interest rates, this is all in all acceptable.
The current solvency of Lån & Spar is a little higher than the solvency of Skjern Bank. Therefore, the combination of the 2 banks will result in a lower solvency in Lån & Spar. Both banks have individually set requirements for the solvency. After the merger the bank will only have the laws minimum requirement of 8 %. For this reason, a solvency of 16.5 % is adequate.
From the reasons above follows that the merger would be an economic advantage for the shareholders of Lån & Spar.
However, a merger will not be trouble less. Big changes will be necessary and this can for instance cause resistance among the employees. In order to avoid this, it is important to involve and inform the employees as much as possible in the process. Hereby, the success of the merger will be secured.
Both banks have been seriously affected by the crisis of credit. Especially Skjern Bank has had a rough time due to high losses on bad loans. It is essential that these high losses stop in order to make the merger a success for the shareholders.
The major benefit of the merger is lower costs. This is done by a general trimming of the joint company which would include a reduction in employment due to synergies. My calculations predict that the annual result of the merged bank will be approximately 83 mill. DKK. In 2010 the result of Lån & Spar was only 43.7 mill. DKK. Even though there will be more shareholders to share this result after the merger, this is still a significantly better result.
A better result means that the bank can achieve minor growth without loss of solvency. Before a merger this wouldn’t be possible. So the situation improves, but is still not as good as the shareholders could hope for. At the same time Lån & Spar’s result will not be as badly affected by an increasing interest rate, as they will be now. Funding costs will, however, become a little higher. But bearing in mind the low consequences of increasing interest rates, this is all in all acceptable.
The current solvency of Lån & Spar is a little higher than the solvency of Skjern Bank. Therefore, the combination of the 2 banks will result in a lower solvency in Lån & Spar. Both banks have individually set requirements for the solvency. After the merger the bank will only have the laws minimum requirement of 8 %. For this reason, a solvency of 16.5 % is adequate.
From the reasons above follows that the merger would be an economic advantage for the shareholders of Lån & Spar.
However, a merger will not be trouble less. Big changes will be necessary and this can for instance cause resistance among the employees. In order to avoid this, it is important to involve and inform the employees as much as possible in the process. Hereby, the success of the merger will be secured.
| Language | Danish |
|---|---|
| Publication date | 29 Apr 2011 |
| Number of pages | 86 |