BoB to invest $20 mn in NZ subsidiary

The arm will cater to the needs of Indian diaspora in Auckland.

Bank of Baroda (BoB) will establish a wholly owned subsidiary in New Zealand to expand its footprint in the Asia-Pacific region. Initially, the public sector bank plans to pump close to $20 million (25 million NZD) in the new entity.

BoB will first cater to the needs of the Indian diaspora in the New Zealand capital, Auckland, and then gradually expand its franchise and branch network. Operations will begin in early FY09, a senior BOB official said.

The bank is in the process of obtaining a 'retail deposit taking' banking licence from the Reserve Bank of New Zealand and completing other incorporation formalities.

Fitch Ratings has assigned an expected long-term foreign currency issuer default rating of 'BBB-' (BBB minus) to proposed subsidiary in New Zealand, he added.

Though BOB NZ's contribution to BoB's total assets and profits would remain insignificant until the subsidiary grows and scales up its operations in due course, the branch along with other overseas offices remain strategically important as the bank plans to expand its international operations.

BoB has a presence in 24 countries and international operations contributed close to 20 per cent and 33 per cent to the total assets and profit respectively in FY07.

At the end of September 2007, BoB reported a 43 per cent year-on-year growth in its overseas business at Rs 46,261 crore. The deposit base saw a 43 per cent rise to Rs 25,304 crore and advances were up by 64 per cent to Rs 20,957 crore at end of September 2007.

The cost of overseas deposits was higher at 4.82 per cent at the end of September 2007 from 3.72 per cent a year ago. The yield on advances did not see the same extent of increase as in the case of deposits. The yield moved marginally to 6.25 per cent from 6.21 per cent.