In a bid to improve performance in asset quality and margins, Allahabad Bank will sell Rs 540 crore worth of non-performing assets (NPAs) to asset reconstruction companies. The process is currently on and will be completed during the current quarter, said Shubhalakshmi Panse, chairperson and managing director of Allahabad Bank.
According to Panse, the bank has adopted a three-pronged strategy to rein in NPAs. This includes appointing a general manager to look after the credit management, doubling the recovery target from Rs 411 crore to Rs 911 crore, and offloading a part of the Rs 2,300-crore NPAs.
Net profit for the second quarter had halved to Rs 234 crore from Rs 488 crore in the corresponding quarter of the previous year. This due to the decline in net interest income and net interest margins, and also because it had to make more provisions against NPAs.
Panse said she hoped to see better performance in the December quarter on the back of reduction in NPAs and recovery in certain economic sectors, including small and medium enterprises (SMEs), manufacturing and retail. She added the stress on asset quality would continue this quarter.
The recovery has been coming from MSMEs (micro, small & medium enterprises), manufacturing, retail and services sectors, while the infrastructure sector led by power and road projects are also getting implemented, according to Panse.
As on September 30, the bank had taken up for restructuring Rs 12,800 crore loan portfolio, which includes Rs 5,700 crore loans of discoms. More corporate debt restructuring is on the cards during the current quarter, Panse added.
The bank hopes to maintain the net interest margin of between 2.8 per cent and 2.9 per cent for the full year this financial year. By March, it expects to raise the low-cost current account savings account deposits from 31 per cent to 31.5 per cent.
According to Panse, there would be a 20-30 basis-point improvement in cost of funds by the end of the current financial year from the present 7.2 per cent, which she expects to bring down to below 6.2 per cent in FY14 after reducing the impact of high cost deposits. For FY14, the bank expects a 17-18 per cent growth in credit and 18-20 per cent growth in savings deposits, she added.
Panse said the government is expected to take up the proposed capital infusion of Rs 1,500 crore when it presents the supplementary Budget.