Allahabad Bank Q3 net profit rises 4.5%

Higher provisions, slow loan growth, lower margin cap earnings growth

Allahabad Bank on Monday said its net profit for the quarter ended December 31, 2013, increased 4.5 per cent from the year-ago period to Rs 325 crore. Higher provisioning, slow loan growth and lower margin capped the earnings growth.

Net interest income, the difference between interest income and expense, was up 0.6 per cent from a year ago at Rs 1,338 crore. Net interest margin (NIM) declined 25 basis points, on a year-on-year basis, to 2.7 per cent. Other income grew 59.2 per cent from the corresponding period last year to Rs 542 crore.   

“We have managed to grow our operating profit during a challenging time. We took a conscious decision to slow our deposit growth, as credit offtake was muted. While retail, MSME (medium, small and micro enterprises) and priority sector loans have grown, corporates have not been borrowing. We have now revised our business target for 2013-14 to Rs 340,000 crore, from Rs 360,000 crore earlier,” Shubhalakshmi Panse, chairperson and managing director, said in her post-earnings comments.

She, however, remained confident the bank would be able to improve its NIM to three per cent by the end of March, as the cost of deposits was declining.

Provisioning increased 24.6 per cent from the same period last year to Rs 684 crore, as asset quality deteriorated.

The gross non-performing asset (NPA) ratio rose to 5.5 per cent at the end of December from 2.9 per cent a year earlier. The net bad loan ratio also increased to 4.19 per cent from 2.06 per cent. Fresh slippages were Rs 1,461 crore.

"We have stepped up our loan recovery and total recovery was Rs 1,473 crore. The increase in NPA ratios is primarily because our loan growth was slow," Panse said.

During the quarter, the bank sold Rs 389 crore of NPAs to asset reconstruction companies. The restructured loan book narrowed to Rs 12,624 crore at the end of December from Rs 13,069 crore in the year-ago period.

Gross credit increased 13 per cent, on a year-on-year basis, to Rs 137,300 crore at the end of the quarter. The bank aims to close the financial year with Rs 145,000 crore of advances. Total deposits were up 9.9 per cent from the same period last year to Rs 187,478 crore. The share of low-cost current account and savings account deposits was 30.8 per cent of all deposits.

Allahabad Bank closed the quarter with a 10.5 per cent capital adequacy ratio, by the Basel-III rules.