Andhra Bank Q2 net drops 20% to Rs 109 crore

Bank's total income rises by Rs 59 Crore

Andhra Bank has posted a 20 per cent drop in net profit for the second quarter ended September 30, 2004, at Rs 109.33 crore down from Rs 137 crore in the corresponding period of the previous year.

"The bank's drop in the bottomline is mainly due to the one-time, Rs 153 crore provisioning it has carried out to transfer government securities worth Rs 4,662 crore from its 'available for sale' to 'held to maturity' category," Andhra Bank CMD T S Narayanasami told a press conference here today.

The bank availed the Reserve Bank of India scheme to transfer securities and protect it from further interest rate rises.

The total income of the bank rose to Rs 829 crore (Rs 770.39 crore) and total expenditure dipped marginally to Rs 488.6 crore (Rs 499.5 crore). Interest income of the bank rose 14 per cent to Rs 273 crore (Rs 238.8 crore) and other income jumped 25 per cent to Rs 261.15 crore (Rs 208 crore).

On a year-on-year basis, Andhra Bank's total advances increased to Rs 14,718 crore (Rs 11,562 crore) and total deposits increased to Rs 24,157 crore (Rs 21,179 crore).

The bank's capital adequacy ratio is at 14 per cent. The bank has an investment portfolio of Rs 9,500 crore out of which Rs 5,700 crore worth of securities are in the 'held to maturity' category and therefore shielded from interest rate movement.

The bank's investment fluctuation reserve is as high as 14.4 per cent, way above the central bank's suggested level of five per cent (or Rs 370 crore).

The second quarter has seen several PSU banks post drops in their net profit, like Corporation Bank, Syndicate Bank, Vijaya Bank, Uco Bank to name a few. Most of the banks that have taken a hit this quarter are likely to be more immune from further rise in interest rates than others.

Andhra Bank's drop in net profits is triggered by a one-time provisioning to shield a large part of its investment portfolio from further rise in interest rates. The rates have risen by over 1.5 per cent since the start of this fiscal.

The chairman said the bank would increase deposit and lending rates if other banks did so. SBI chairman A K Purwar had earlier stated that there is a case for a rise in short-term lending and deposit rates following the RBI increasing the short-term repo rate.