Allahabad Bank seeks synergies in west, south

Allahabad Bank chairman O N Singh said yesterday the bank was looking for synergies in the west and south.

"We are looking at synergies on three fronts "" geography, structure and activity. We are very strong in the east, north and central regions of the country.

We have an idea to synergise in the west," said Singh, at a press conference held here yesterday to launch the bank's debit card in association with Visa.

Even though he refused to name the banks being circled, sector analysts said Singh may have Bank of Maharashtra in Mumbai and Indian Overseas Bank in Chennai in mind for alliances.

The bank plans to tap the capital markets with a Rs 100 crore public issue (face value) in December or January.

The funds are being raised to comply with the Basel II requirements, the credit growth and the synergies in mind, said Singh. The government's holding in the bank post the issue will drop to 60 per cent from the current 71 per cent. The bank has a comfortable capital adequacy ratio of 12 per cent.

Singh's statement (on possible acquisitions) comes among several bank chairmen proclaiming their appetite for mergers and acquisitions. Bank of Baroda, Union Bank of India, Indian Bank, Vijaya Bank and Corporation Bank have all gone public with their ambitions soon after the finance minister urged the banking sector to consolidate.

Asked which banks he was talking to, said the chairman, "In one to one and a half months time things will be clear."

Citing examples of areas for synergies, said Singh, there could be sharing of assets, services or branches. "Servicing of ATMs could be another area since all banks are just duplicating the activity. Other banks could pick up stakes in our NBFC, Allbank Finance which we are trying to revive," he added.

The logic behind synergies according to him were reduction of transaction costs, to achieve compliance with Basel II norms and building of strong Indian banks to compete with foreign banks which will have a stronger foothold in the country post further liberalisation in the financial sector.

Allahabad Bank expects to post treasury gains this quarter despite the turmoil in the bond markets.

It has availed the RBI facility and transferred Rs 7,500 crore of securities from the available for sale to the held to maturity category.

It expects to post treasury gains even after provisioned for the transferred securities. The bank will declare its results on October 11.

For the full year the bank would be able to achieve its projected numbers of an operating profit of Rs 1,100 crore and a net profit of Rs 600 crore, the chairman said.

The bank has total deposits of Rs 47,000 crore and total assets of Rs 42,000 crore as on September 30.