Andhra Bank joint venture subsidiary in Malaysia to start operations in 3 months

Andhra Bank, a public sector lender banking subsidiary in Malaysia will start operations in the next three months.

Chairman and Managing Director RS Reddy told Business Standard informed, “In all probability, we will register the subsidiary and start operations in two-three months.”

The bank will start the subsidiary in association with Bank of Baroda (BoB) and Indian Overseas Bank. Through the subsidiary bank is expected to cater the Indian population in Malaysia. Andhra bank has a 25% stake in the venture which comes to Rs 104 crore.

The bank has obtained clearance from both the Malaysian Central Bank as well as the Reserve Bank of India for subsidiary. Reddy told, BoB already has a representative office in Malaysia therefore the formalities for subsidiary will be completed smoothly.

Reddy added, in Malaysia out of the 8% of the population, about 2.1 million people are of Indian origin and the subsidiary will be catering to their financial needs. Apart from this, the bilateral trade between India and Malaysia is also increasing and now it stands at about $10 billion

The IndiaFirst Life Insurance Company, an insurance joint venture (JV) of Andhra Bank, BoB and Legal and General Plc of the UK, has started sale of insurance policies through their branch outlets. In the venture Andhra Bank has invested Rs 60 crore for 30% stake.

A senior official of the bank told, up till now AB had 19,689 policies and has collected a premium of Rs 53.44 crore, earning a commission of Rs 2 crore.

Meanwhile bank is expecting to earn a commission of about Rs 20 crore by collecting a premium of around Rs 250 crore.

For the next five years, Andhra Bank has set a target of achieving annual growth rate of 25 per cent, regarding this Reddy said with return on equity being 29.99 per cent the bank’s internal growth alone will help in meeting the target.

He said, last year, bank had registered a net profit of Rs 1,046 crore. After payment of dividend over Rs 760 crore was added to the Tier-II capital, “which will support the 25 per cent growth strategy,” he said.

Andhra Bank had got Rs 1,000 crore from the central government for which the bank will be issuing perpetual non-cumulative preference shares to increase its capital. Reddy added, capital is not a big issue for the bank as it already has a capital adequacy ratio of 14%.

Andhra Bank is planning to open 120 more branches in 2010-11 out of which it plans to open 50 branches outside Andhra Pradesh.

The bank is also working on increasing the share of fee-based income in the total from 12% to 15% in the current year and 18 per cent in 2011-12. Last year, bank fee –based income amounted to Rs 965 crore.