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Corporation Bank sets sights on banks in north

New Delhi, Jan. 30: Corporation Bank is interested in acquiring a bank which has a strong presence in north India.

“We have the resources to pick up a majority stake in any of the banks now on offer but our criteria is that it should have an extensive branch network in the north,” K Cherian Verghese, chairman and managing director told The Telegraph in an interview.

The cash-rich Mangalore-based Corporation Bank has a higher capital adequacy ratio (CAR) of 22 per cent, a benchmark index indicating a bank’s liquidity reserves, against the Reserve Bank of India’s stipulated 9 per cent.

However, Verghese refused to name any particular bank he was interested in. “We need to focus on increasing our presence in the northern region of the country.” Hence the possibility of the South-based bank acquiring a bank here.

Among the banks which are up for sale are IDBI Bank, UTI Bank, Bank of Punjab and the ailing Centurion Bank. Of these, Bank of Punjab has a deep-rooted network in the north, though UTI and IDBI also have good networks in the north among other regions.

Vijaya Bank has also been eyeing Bank of Punjab and negotiating with them.

In the case of IDBI Bank and UTI Bank, the government has directed the parent financial institution, IDBI, and fund management firm Unit Trust of India (UTI) to hive off their respective firm’s non-core assets. IDBI has a 57 per cent stake in IDBI Bank and UTI has a 47 per cent holding in UTI Bank.

While Bank of Punjab is on the look out to offload majority equity stake to a strategic partner, the ailing Centurion Bank’s due diligence programme has been undertaken by Rana Talwar-promoted Sabre Fund.

Verghese said Corporation Bank has recently signed a memorandum of understanding (MoU) with state-run Life Insurance Corporation (LIC) which will allow Corporation Bank to use LIC branch premises to open branches.

“We will open around 100 of these branches,” Verghese said. The bank currently has tied up with five other banks, among which are Oriental Bank of Commerce and Allahabad Bank for sharing ATM networks.

Verghese said the home loan sector will be the key to its retail banking profits. “Our home loan portfolio will grow to Rs 1,500 crore by the end of the current fiscal,” he said.

Verghese also said the bank will focus on providing loans to small and medium enterprises. “These are mid-segment accounts and range between Rs 5-15 crore.”

The bank’s net profit in the third quarter (October-December 2002) has surged 66 per cent to Rs 151.81 crore from Rs 91.45 crore in the year-ago period.

For the nine-month period of April-December 2002, it has reported a net profit of Rs 368.72 crore, up from Rs 262 crore in the year-ago period. Net profit as a percentage of total assets stood at 1.31 for the year ended March 31, 2002.

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