Sell Andhra Bank’s Stake In Life Insurance

Union Bank May Sell Andhra Bank’s Stake In Life Insurance

Union Bank may look at exiting Andhra Bank's life insurance venture post the amalgamation of the two lenders, according to a senior official.

The final decision will be taken by the board of the merged bank, based on the valuation and also meeting the regulatory guidelines, Union Bank Managing Director and Chief Executive Rajkiran Rai G have said.

Andhra Bank and Corporation Bank will get amalgamated into Union Bank on April 1, making it the fifth-largest public sector bank in the country.

The government's mega consolidation plan to amalgamated ten state-owned banks to create four global size lenders, beginning next fiscal year

Following the merger, all investments of Andhra Bank and Corporation Bank will come under Union Bank as a combined entity.

Andhra Bank has a life insurance joint venture -- India First Life Insurance -- wherein it owns 30 percent equity.

The other partners -- Bank of Baroda and Carmel Point Investments, owned by Warburg Pincus, own 44 percent and 26 percent, respectively, in the insurer.

Andhra Bank had made an attempt earlier to sell its stake in the life insurance company but it did not yield any result.

"The board of the merged bank will decide on exiting India First, based on valuation and according to the regulatory (Irdai) guidelines," Rai told PTI in an interview.

Union Bank also has a life insurance venture -- Star Union Dai-ichi Life -- with a 25.10 percent equity, along with Bank of India and Dai-ichi Life Holdings of Japan.

"Both these insurance ventures are doing very well.

Looking at SBI Life and others, I think the valuation of insurance companies is only going to improve going forward.

So, exiting at the right time, with the right valuation is very important," Rai said.

Besides, Andhra Bank has a banking subsidiary in Malaysia -- India International Bank of Malaysia.

It holds a 25 percent stake in the bank and the balance is owned by Bank of Baroda and Indian Overseas Bank.

"We may look at exiting the Malaysian banking subsidiary as well if there is a good valuation,"

Rai said, adding that the board will make a decision at an appropriate time.

The amalgamated bank will continue with Corp Bank Securities, the wholly-owned brokerage of Corporation Bank, he said.

Apart from providing broking services to institutional clients, Corp Bank Securities also distribute mutual funds and trade in government bonds, certificates of deposits, treasury bills, commercial papers, and investment in fixed deposits.

In FY19, it earned an income of Rs 9.73 crore and a profit after tax of Rs 7.68 crore.

There are three other mergers of public sector banks under the mega consolidation plan.