Mumbai: State-run Union Bank of India is seeking partners for its wealth management business, which it plans to launch in FY12, a senior official told Reuters on Thursday.
“We are proposing to enter into the area of wealth management. We are exploring the possibility of finding a partner who has the domain knowledge in the area of wealth management,” S.C. Kalia, executive director, said over the telephone.
The lender already has an insurance tie-up with Star Union Dia-ichi Life Insurance Co and had formed a mutual fund joint venture with Belgium’s KBC last year. [ID:nSGE62P080]
According to media reports, another state-run lender, Bank of India, is close to buying a 51% stake in Bharti AXA Investment Managers, a joint venture between India’s Bharti Enterprises and AXA Asia Pacific Holdings Ltd.
Union Bank plans to raise nearly Rs 1,100 crore through a preferential allotment of shares to the government and does not have any immediate fund raising requirements, Kalia said, adding it has “lot of headroom” to raise Tier II capital.
It expects credit growth of 22-25% and deposit growth of 18-20% in FY12, Kalia said. For FY11, it expects loan growth of 25% and deposit growth of 22%.
“When the GDP growth is going to be 9%, what has been indicated in the union budget, we believe that the credit growth should not be less than 22%,” he said.
“Right now we are quite comfortable so far as our deposit growth is concerned vis-a-vis the industry.”
However, there could be pressure on margins, if the interest rate hikes continue, he said.
“Given the kind of interest rates scenario that we are witnessing, unless the interest rates stabilise it will be very difficult for banks going forward to maintain the growth momentum and go on increasing the base rate also,” he said.
Reserve Bank of India has raised rates seven times since March last year and is widely expected to raise it further at next week’s mid-quarter policy review.
Asset quality was not a concern as of now, but if interest rates hikes continue, non-performing assets (NPA) could rise, he said.
“Asset quality... I don’t think there should be (pressure) unless interest rates keep on increasing. Then, of course, you know some kind of stress comes on corporate earnings.”
Its net non-performing assets have risen to 1.21% in December from 0.8% in March 2010.
The bank expects low-lost current account savings account deposits (CASA) to increase to 35% in 2011-12 from around 33.27 as of December-end.
At 1.32 p.m., shares of Union Bank were trading down 0.44% at Rs 330.2 in a weak Mumbai market.