Mumbai: The country’s fourth largest public sector lender, Bank of India (BoI), is planning a re-entry into the asset management business five years after scrapping its solo venture and is looking for a foreign partner this time around.

The bank is ready to divest up to 49% and has identified a handful of potential partners, both existing players and new ones, according to two officials with knowledge of the development. “We want to have a good name that has proven expertise in handling this business," said one of them, a senior official with the bank who did not want to be named.

The bank wants to have a majority stake in the venture, the official said. It has appointed consultant Ernst and Young India Ltd to identify a partner, he said.

“The bank has identified five or six players who can bring in offshore funds. The senior management is screening their suitability. They will make a shortlist, before starting dialogue. The whole process is likely to take two months," said one of the two officials cited above.

BoI is well positioned to give any potential foreign partner the initial push it requires, analysts said. Arun Jethmalani, managing director, ValueNotes Database Pvt. Ltd, a Pune-based business research firm, said such banks are in a strong position after the changes in the distribution system.

“They have a strong customer base who walk into their branches everyday," he said. “Every mutual fund would love to have a banking partner. Lot of banks are realizing their value now, though a little late in the day."

As of 31 March, BoI had 3,207 branches and 820 automated teller machines (ATMs). The bank, in a press release announcing its fourth quarter results, said it plans to have a network of at least 3,500 branches and 1,500 ATMs by March 2011 and enlarge its presence abroad. The bank’s fourth quarter net profit fell 47% to Rs428 crore mainly due to higher provisions.

Since BoI is starting afresh, it needs to go through the regulatory approval process, which can take up to one year. However, joining hands with a player with existing operations would help save time.

US-based Prudential Financial Inc. and France’s Axa Group are two potential partners that are on BoI’s radar. “An existing player with necessary approvals will help the bank start operations faster," the official said. Both the Axa Group and Prudential Financial started as joint ventures with local partners that did not have a financial services background, but had a strong distribution network. Industry experts say the idea didn’t click with customers.

“If people want to buy medicines, they are more comfortable picking them from a pharmacy than say a supermarket," said the chief executive officer of a foreign asset management firm, who did not want to be named. “Similarly, an investor would buy financial products from a bank than from a mobile phone centre."

Real estate firm DLF Ltd held 39% in DLF Pramerica before exiting, while Axa is still in a joint venture with the Bharti group, where telecom is the dominant interest.

Pramerica Asset Managers Pvt. Ltd, as the new entity is called after the DLF exit, received approval last week to launch its products. Bharti has said that it’s open to all options. “Bharti might dilute its stake or exit if necessary at an appropriate time," a company spokesperson said last year.

Among other players on BoI’s radar, Aegon Asset Management Co. Pvt. Ltd already has approval from market regulator, the Securities and Exchange Board of India, having obtained this for a joint venture with Religare Enterprises Ltd. However, Religare decided to acquire troubled Lotus Asset Management in 2008 and opted to go solo.

Officials from Pramerica Asset Managers and Bharti Axa Investment Managers Pvt. Ltd refused to comment. Aegon country head Vimal Bhandari was on a holiday and could not be reached.

Japanese firm Dai-ichi Mutual Life Insurance Co., which already has an insurance joint venture with BoI, Aviva Plc and BBVA SA are the other names on the list. None of these three firms have regulatory clearance to launch mutual funds.

BoI started a MF business in 1990 and launched six schemes. It redeemed four of them and transferred two to Taurus Mutual Fund after offering an exit option to investors by 2004.