AllBank to hold 34% in non-life venture

Britain-based non-life insurer roped in as partner.

The Kolkata-based Allahabad Bank has finalised the shareholding of its proposed general insurance venture. The public sector bank along with AllBank Finance, its merchant banking subsidiary, would hold 34 per cent stake in the venture, chairman and managing director O N Singh said.

The bank has roped in a UK-based non-life insurer as a partner, which would bring in domain expertise. The partner would hold 26 per cent stake. Singh did not name the UK firm but said details, including business strategy, were expected to be announced over the next few weeks.

Consultancy firm Ernst & Young is working on the bank's strategy for the insurance foray. The Chennai-based Indian Overseas Bank would also pick up a 15 per cent stake in the venture, taking the combined holding of public sector entities to 49 per cent.

Karnataka Bank, Bank of Rajasthan and an industrial house would hold 25 per cent stake. The insurance joint venture would have an initial capital of Rs 200 crore.

Allahabad Bank has a extensive branch network in the north, while IOB's strength is in the south. This would complementary network structure would help to penetrate target markets from position of strength.

Allahabad Bank has shown better performance compared to its peers in deposits mobilisation and growth in advances in the first quarter of 2005-06. Its deposits grew by 3.50 per cent till June 2005 over March 2005, while peer group banks showed a just 1.54 per cent growth in the same period. It posted a 5.04 per cent growth in gross advances compared with 4.15 per cent increase posted by peers.

The bank was also be ahead of the pack on the financial health parameters. Its gross NPAs to gross advances ratio was 5.37 per cent against 5.74 per cent for the average for peer group entities. Its gross NPA levels was much higher at 13.67 per cent for FY03 compared with 10.24 per cent for peer.

The net NPAs to net advances was also less at 0.99 per cent compared with 2.07 per cent for peers at the end of quarter ended June 2005.

Net NPAs ruled high at 7.09 per cent compared with 4.85 per cent for peer group at the end of March 2003.

The business of the Allahabad Bank, comprising deposits and advances, rose by 24.6 per cent to Rs 68,933 crore mark as on September-end 2005. Allbank's net profit increased from Rs 303.22 crore at end of September 2004 to Rs 331.33 crore on September 2005.