Post merger, Union Bank may sell Andhra Bank's stake in life insurance

Mumbai, Mar 30 () Union Bank may look at exiting Andhra Bank's life insurance venture post amalgamation of the two lenders, according to a senior official.

A 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 has 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 merger is part of the government's mega consolidation plan to amalgamate 10 state-owned banks to create four global size lenders, beginning next financial 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 per cent equity. The other partners -- Bank of Baroda and Carmel Point Investments, owned by Warburg Pincus, own 44 per cent and 26 per cent, 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 in an interview.

Union Bank also has a life insurance venture -- Star Union Dai-ichi Life -- with a 25.10 per cent 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 feel valuations of insurance companies are 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 Malaysia. It holds a 25 per cent stake in the bank and the balance is owned by Bank of Baroda and Indian Overseas Bank.

"We may look at existing the Malaysian banking subsidiary as well if there is a good valuation," Rai said, adding that the board will take a decision at an appropriate time.

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

"We were also planning to enter the brokerage business. But when this amalgamation was announced, and when we looked at this subsidiary of Corporation Bank, we shelved our plans. We will fully leverage its capabilities now," Rai said.

Apart from providing broking services to institutional clients, Corp Bank Securities also distributes mutual funds and trade in government bonds, certificate 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.

Punjab National Bank will takeover Oriental Bank of Commerce and United Bank of India to form the nation's second largest lender; Canara Bank will integrate Syndicate Bank with itself, and Allahabad Bank will be merged into Indian Bank.

Following the consolidation, there will be seven large public sector banks, and five smaller ones. There were as many as 27 state-run banks in 2017 when the SBI took over five of its associates and Bharatiya Mahila Bank.

In 2019, Vijaya Bank and Dena Bank got merged with Bank of Baroda, making it the third largest state-run bank. HV BEN SHW BALBAL