Allianz to pick up stake in Global Trust Bank - Views on News from Equitymaster

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Allianz to pick up stake in Global Trust Bank

Dec 22, 1999

According to reports, Allianz, Europe's leading financial services group, is picking up a 20% stake in Global Trust Bank (GTB), one of India's new private sector banks. The stake, which will be acquired via a fresh issue of equity, is being picked up at a price of Rs 150 per share. In view of the intense competition prevailing among the private sector banks, the decision to invite a strategic partner to take a stake in the bank is likely to be beneficial. This is mainly due to the fact that with Allianz as its partner, GTB would get access to the latest technology and banking products. This would increase GTB's competitiveness in the markets as well as its profitability.

With private sector participation in insurance having been permitted, GTB could leverage on its partnership with Allianz, which has already formed ventures in India for this purpose, to capitalise on this opportunity.

A tie up with Allianz is in the best interests of GTB in view of the consolidation in the domestic banking industry where 'size' is likely to become a key competitive strength. The most recent merger has been between HDFC Bank and TimesBank. Rumours of several other such marriages are constantly doing the rounds.

Although GTB stands to gain from this arrangement it must nevertheless look at increasing its market presence. A larger base (branch network) would give the bank an opportunity to exploit economies as well as cross sell (assuming Allianz markets insurance products via GTB) financial products. This would stimulate topline and bottomline growth at the bank.

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