Allahabad Bank on Monday said its net profit for the quarter ended September 30 halved to Rs 234 crore from Rs 488 crore a year ago, as the lender made more provisions to limit the effect of deteriorating asset quality. Decline in net interest income, coupled with dilution in net interest margin contributed to the sharp fall in post-tax profit.
“The earnings were affected because we made higher provisions for non-performing assets (NPA). Also, there was diminution in the fair value of restructured assets. Write-offs have also increased,” Shubhalakshmi Panse, chairperson and managing director, said in her post-earnings comments. The bank made a total provision of Rs 568 crore against Rs 461 crore in the corresponding period of last year. NPA provisions were up 17.5 per cent from a year ago to Rs 355 crore.
The state-run lender said there were slippages of Rs 1,700 crore during the three-month period.
The gross NPA ratio deteriorated 118 basis points year-on-year to 2.95 per cent and the net NPA ratio expanded 141 basis points to 2.1 per cent. Allahabad Bank restructured Rs 2,700 crore of loans and closed the quarter with Rs 12,748 crore of restructured asset portfolio. Of these, Rs 11,700 crore were classified as standard advances, Rs 555 crore were sub-standard loans and Rs 400 crore were doubtful assets.
“We will need an additional Rs 90 crore to meet the new provisioning norms on restructured loans. We will now focus on recovery and upgradation and aim to bring our gross NPA ratio to two per cent by March 2013,” Panse said. Most of the restructured loans were to the power sector, including state electricity distribution companies, followed by textile and aviation companies. In the first six months of this financial year, the bank recovered Rs 967 crore of loans.
Operating performance
Net interest income, or the difference between interest income and interest expense, fell by 10 per cent year-on-year to Rs 1,174 crore. Net interest margin fell by 88 basis points to 2.80 per cent during the quarter.
Gross advances increased 15.8 per cent to Rs 112,158 crore.
Deposits were up 14 per cent at Rs 161,957 crore.
Share of low-cost current account savings account (CASA) deposits was at 30.5 per cent, while bulk deposits formed around 19 per cent of the bank's total deposits.
“Our aim is to improve our margin to 3 per cent. We are looking at 16 per cent growth in our advances and 14 per cent growth in deposits during the current financial year,” Panse said.
The bank closed the quarter with a capital adequacy ratio of 12.16 per cent. The bank has requested the government to provide Rs 1,500 crore to strengthen its capital base.
