Life Insurance Corporation (LIC) may get the government’s nod to acquire UTI Bank. The acquisition will give the country’s largest insurance company an entry into the banking sector.
At present, LIC holds 10.38% stake in UTI bank. LIC may get the green signal to buy out the 27.44% stake that the Specified Undertaking of the Unit Trust of India (SUUTI) holds in UTI Bank, to take its stake to 37.82%.
The move comes at a time when UTI Bank has been asked to find a brand identity. The bank and UTI Mutual Fund have been locked in a dispute over who would get to retain the UTI brand.
It makes sense, sources close to the developments said, if the bank could instead build on the strong brand recall of LIC.
Finance minister P Chidambaram had recently said the big financial institutions should be in a position to provide the entire range of financial services under one roof.
However, for the acquisition of the fast growing private sector bank, LIC would need a nod from the Insurance Regulatory & Development Authority, too. LIC also holds about 27% in state-owned Corporation Bank.
RBI recently asked UTI Bank chairman & managing director PJ Nayak to continue either as non-executive chairman of the bank or remain a managing director after his term ends in July. Nayak is believed to have decided to put in his papers, instead.
In 2006-07, the bank became the largest corporate loan syndicator in the country. It has been positioning itself as a pan-Asian bank, with branches in Dubai, Hong Kong and Singapore.
The net profit of UTI Bank for the first nine months of 2006-07 was Rs 447.14 crore, a 34.14 % jump over the corresponding period of 2005-06. Its share closed on the NSE at Rs 463.25 on Thursday.
LIC’s profit was 5,800 crore in 2005-06. The corporation mopped up Rs 18,085 crore in premiums during the year.
Apart from LIC and SUUTI, other shareholders in UTI Bank include General Insurance Corporation, National Insurance Company, New India Assurance Company, Oriental Insurance Corporation and United Insurance Company.
Source : Financial Express