Andhra Bank may up home loan rates soon

Bank's proposed second public issue likely in first half of 2005

Hyderabad-based Andhra Bank is mulling an increase in its home loan rates next month by about 25 basis points. The bank has also indicated that the proposed second public issue by the bank may happen only in the first half of 2005.

Speaking to Business Standard, T S Narayanasami, chairman and managing director of Andhra Bank, said, "At present, there is no immediate plan to hike the prime lending rate, though the bank is looking at a 0.25 per cent increase in home loan rates. We would have a look into the matter in January when our board meets and then decide if the hike in home loan rates is necessary."

Speaking about the proposed second public issue of the bank, he said, "We will look into the matter in the next three to four months as there is no immediate need for funds in the bank. He said that if at all the bank goes in for the issue, it will be held in the first half of 2005, and not in the near future as initially expected."

"We expect a better price if the issue comes later, as there are a bunch of issues at the moment. I would like to be greedy in this aspect for I would like to get the best price that my stocks deserve. We would like to come out with our public issue at a time when it is the lone one, to get the maximum attraction from investors," he said.

The bank is also trying to bring down its gross NPA by expanding the credit percentage, but the focus is on bringing it down in absolute terms because it is one factor that will support profitability, Narayanasami indicated.

The bank's gross NPA level for the first half of the year was at 3.4 per cent and, according to Narayanasami, it is expected to be around three per cent by the end of December and expects to close the current financial year with the gross NPA at around 2.5 per cent.

"The bank is having recovery camps and is going in for negotiated settlements to recover the bad debts. We have settled around 20 accounts with the help of ARCIL which fetched us around Rs 16 crore and we expect to close around six accounts this quarter with their help," he said.

The bank aims at achieving a business volume of Rs 45,000 crore during the current fiscal, representing a 25 per cent growth in business compared to the previous financial year. Narayanasami said that out of the total business of Rs 45,000 crore, Rs 27,500 crore is expected to crore from the deposits and the remaining Rs 17,000 crore from advances.

"As the yield from the treasury operations has tapered off, the bank plans to concentrate on its core banking activities to cushion the impact of the fall in yield from the treasury business," he said.

According to him, a stage has come for banks to rely on core banking operations and other income coming from fee-based activities to boost their performance.

The bank is also looking at opening 50 new branches by the end of the current fiscal. "We have obtained the licence for 40 and have already opened 10 branches. Out of the 50, around six are expected to come up in the state while the remaining will come up in the other parts of the country," Narayanasami said.