Canara Bank and HSBC see growth potential in life insurance joint venture

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While state-owned Punjab National Bank (PNB) is in the process of selling its stake in Canara HSBC Oriental Bank of Commerce Life Insurance for regulatory reasons, the remaining shareholders Canara Bank and HSBC India do not plan to sell their stake for the moment. , as both entities expect the life insurance joint venture (JV) business to grow in the future.

The joint venture can leverage the extensive branch network operated by Canara Bank, as well as the synergies created by working with HSBC, Hitendra Dave, CEO of HSBC India, told reporters. He was speaking at an event where the insurer was renamed Canara HSBC Life Insurance.

With PNB selling its stake in the insurer, the company’s renaming will give greater clarity to customers, said Canara Bank MD & CEO LV Prabhakar.

“HSBC have made their point clear and we love this business, we love this business. Canara Bank has their large network but in a different segment and HSBC in a very niche segment. So where possible we would like associate ourselves, but it is an independent decision of the shareholders,” he said.

Canara Bank also does not foresee any dilution of its stake in the life insurer as it believes it can achieve better valuations in the future, Prabhakar said.

With Canara Bank’s core business remaining strong, the lender is keen to secure higher valuations for the joint venture. As of March 31, the valuation of the life insurance company stood at around Rs 3,800 crore. The company has also posted a loss since its inception in 2008, said Anuj Mathur, MD and CEO, Canara HSBC Life Insurance. However, the lender has not completely ruled out the option of selling its stake in the insurer.

“Canara Bank is waiting for an appropriate time when valuations are very attractive and then the bank will take a call on dilution. As of today, Canara Bank will remain with the subsidiary. But the option is still open. sale to an interested party. The second option is that we want every subsidiary of Canara Bank to go for an IPO, that option is open as well,” Prabhakar said.

Currently, Canara HSBC Life Insurance is owned by three entities. Canara Bank is the majority shareholder with 51%, while HSBC India holds 26% and PNB holds 23% of the capital of the insurance company. Oriental Bank of Commerce (OBC) previously held the stake in Canara HSBC Life Insurance, but the stake was transferred to PNB after the merger. After the merger of OBC planned by the government, PNB must dilute its stake in the life insurance company because insurance regulations do not allow a bank to hold more than 10% of the capital of more than an insurance company.

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