AllBank plans insurance entry through arm

Public sector Allahabad Bank is exploring the possibility of entering into the insurance business through its subsidiary, AllBank Finance Ltd (AFL), which has a paid up equity capital of Rs 60 crore.

According to bank's chairman and managing director Onkar Nath Singh, the bank has drawn up a revamping plan for AFL and the emerging opportunities identified are investment banking including structured finance and debt advisory, insurance broking, stock broking, wealth management and portfolio advisory and insurance underwriting.

Singh said that Ernst & Young had been engaged as consultant to formulate an information technology (IT) strategy and business process re-engineering (BPR) needs of the bank apart from examining the feasibility of entering the insurance business.

Addressing a press conference following the bank's board meeting here on Tuesday, Singh said that Allahabad Bank, which came out with a second public issue of 10 crore equity shares through book-building process recently, had completed allotment of equity shares to the subscribers.

The issue price had been fixed at Rs 82 per share as over 94 per cent of the bids received were in the upper price band of Rs 82.

He said that the bank's business crossed Rs 63,000 crore last fiscal, registering a growth of 31.6 per cent over the previous year. The operating profits of the bank were expected to increase by over 20 per cent to about Rs 1,100 crore from Rs 863 crore in 2003-04.

Accordingly, profit after tax (PAT) in 2004-05 is expected to go up to Rs 550 crore as against Rs 463 crore in the previous year.

In the current fiscal, the company has targeted to achieve an operating profit of Rs 1,200 crore and a PAT of Rs 800 crore.

The IT strategy of the bank, Singh said, involved implementation of centralised banking solution (CBS) in 400 branches in the first phase, networking of 400 locations and controlling offices, data warehousing, establishment of delivery channels including internet banking and SMS banking and setting up of help desks and call centres.

The bank, which provided Rs 200 crore for execution of its IT plan, had shortlisted three vendors for the purpose and the final technical evaluation was under process.

For implementation of CBS, the bank would own the required hardware, while the software would be outsourced.

The corporate plan of the bank for the current fiscal envisages a business of Rs 80,000 crore.

The plan aims at improvement in earnings per share, higher return on net worth, enhancement in return on assets, improvement of market share, improvement of productivity and bringing down the net non-performing assets (NPA) to net advances to less than one per cent.

The total deposits of the bank was projected to grow by 25.1 per cent to reach to Rs 51,000 crore by March 2006.

In 2004-05, Singh said, the net NPA to net advances was likely to be less than 1.5 per cent while gross NPAs to gross advances were expected to decline to less than 6 per cent from 8.66 per cent in the previous year.

The net NPA was stated to have declined on account of an intensive recovery drive.

The bank plans to strengthen its presence in the South, particularly in Andhra Pradesh and Karnataka, in the current year. It will be opening more branches in these two states.

The bank also has plans to increase its ATM network from the existing 100 to over 350. It would join the National Financial Switch network for providing better services to the customers.

It is in the process of establishing its presence in Khazakisthan in a joint venture with Punjab National Bank apart from setting up a full-fledged branch in Hong Kong.

The bank also proposes to open a representative office in China, Singh added.