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Most public sector banks are eagerly looking forward to the allocation of capital infusion, which the finance ministry said last week. However, Andhra Bank is not one of them. Reason: It has enough cushion to meet its growth targets this financial year.
Andhra Bank's managing director and CEO Satish Kumar Kalra said although the bank has sought a capital infusion of Rs 500 crore from the finance ministry, it has sufficient capital to achieve the growth targets for FY16. "The risk weighted assets to the capital adequacy ratio should be 10 per cent and Andhra Bank is at 11 per cent. So we have a one per cent cushion."
The bank expects to raise a capital of Rs 3,000 crore in FY16 - Rs 700 crore through the qualified institutional placement route; Rs 1,800 crore though Tier-I and Tier-II bonds; and Rs 500 crore from capital infusion from the government.
"We will hit the market at our own terms and raise the money only if it is viable for us. The bank has already been taking leverage of the cheaper funds available in the international market and other measures like borrowing against SLR (statutory liquidity ratio) in a big way, which helped cut the cost of borrowing by 40 basis points. The yield on advances grew 12 basis points in the last financial year," said Kalra.
He added the bank's focus is on bottom line and not balance sheet size.
The bank plans to add 50 new branches pan India, 80 per cent of which will be opened in states other than Andhra Pradesh and Telangana. The total branch network of the bank would be 3,000.
According to Reserve Bank of India guidelines, 25 per cent of the new branches would be opened in un-banked rural centres (Tier-6).
Kalra said current account-saving accounts, or Casa, would be the main growth driver in the profitability of the bank. The lender is eyeing an average deposit of Rs 5 crore and Casa of Rs 3 crore per branch per year from new branches.
"The bank is projecting a gross NPA (non-performing assets) of five per cent and net NPA of 2.5 per cent for FY16. The actual NPA registered in FY15 was 5.31 per cent (gross) and 2.93 per cent (net).
Andhra Bank's cost-to-income ratio of 43 per cent is much lower than the industry average, Kalra said, adding the bank would pull it down further. The bifurcation of Andhra Pradesh and Telangana made a dent on the bank's business for a short while, he noted.
