AllBank plans strategic tie-ups with 3 pvt banks

Allahabad Bank (AllBank) is looking at the possibility of clinching strategic tie-ups with Laxmi Vilas Bank in Tamilnadu, Dhanalaxmi Bank and Federal Bank in Kerala. The bank also did not rule out the possibility of taking small stakes in these as a part of the deal.

Top Allahabad Bank sources confirmed the development and said that a team of experts was recently formed to examine proposals for tying up with other banks.

"The management of the three banks had approached Allahabad Bank for a deal and we took up the opportunity to study the pros and cons of a tie-up," explained a top executive of Allahabad Bank.

"We are waiting for concrete proposals from these banks following which this team would visit them and look into the pros and cons of the deal. This team after having studied these proposals would place it to the board," he added.

"The possibility of taking a small stake in these banks is also not being ruled out," he added.

The banks are yet to arrive at a decision and the process could take anything between three to six months. Of the three banks, Allahabad could end up tying up with only one bank and not all three.

Allahabad Bank had a minimal presence down south and the strategic tie-up would allow Allahabad to enhance its presence in southern states. The tie-up would help speed up Allahabad Bank's expansion to expand inorganically.

Allahabad Bank had sometime back prepared a concept paper on consolidation that was placed at the board.

Chairman and managing director O N Singh had earlier said the bank would take up the consolidation exercise in 2005-06 where it would look for geographical synergies with banks situated in western and southern India.

It is looking at tying up with these three banks for fee-based activities such as draft drawing arrangement, bill collection, issue of letter of credit and bank guarantees, as well as custom made products for specific requirements.

The alliance is likely to be a two-way tie-up where Allahabad Bank will also offer services on behalf of these banks in geographical locations where it was present.

The synergy would primarily look for creation of better value and the process will also look at creating presence in different orbits," the executive said.

In a parallel development, the bank is working on a business model for All-Bank Finance, its ailing subsidiary, which would also involve brokering services, loan appraisal and syndication.

"The subsidiary will take up services which do not involve fund-based activity. The business plan being finalised will be put before the board shortly," he added.

AllBank Finance was also looking at the possibility of cross selling of products such as insurance and mutual funds and is likely to start operations in the next one year.