Allahabad Bank to off-load Rs 540 cr worth NPAs this quarter

Getting a new GM, doubling recovery target part of bank's three-pronged strategy for the purpose

Allahabad Bank is in the process of selling Rs 540 crore worth of non-performing assets (NPAs) to the assets reconstruction companies as a part of the ongoing effort to improve its performance in terms of asset quality and margins.The process of off-loading will be completed during the current quarter, according to the bank's chairperson and managing director Shubhalakshmi Panse.

Disclosing this here today, Panse said the bank has adopted a three-pronged strategy to reign in the NPAs, including appointing a general manager to look after the credit management, doubling the recovery target to Rs 911 crore from the previous Rs 411 crore besides off-loading a part of Rs 2,300 crore NPAs.

It may be recalled that the bank's net profit for the second quarter ending September, 2012 had halved to Rs 234 crore from Rs 488 crore in the corresponding quarter last year as it had to made more provisions against NPAs in addition to the decline in net interest income and the net interest margins. The gross NPAs went up to 2.98%.

The bank chief said she hopes to see better performance in December quarter compared to the previous quarter on the back of reduction in NPAs and recovery in certain economic sectors including SMEs, manufacturing and retail. However, she maintained that the stress on the asset quality would continue this quarter due to the lag effect of last year though uptake in credit growth has been visible.

The  recovery has been coming from MSME, 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, 2012, the bank had taken up  for restructuring of Rs 12,800 crore loan portfolio which includes Rs 5,700 crore loans of Discoms and further corporate debt restructuring is on the anvil during the current quarter, she said.

The bank hopes to maintain the net interest margin of between 2.8% to 2.9% for the full year this year while it expects to increase the low-cost current account savings account(CASA) deposits to 31.5% from the present 31% by March, 2013..

She said there would be a 20-30 basis point improvement in cost of funds by the end of the current year from the present 7.2% but expects to bring down the same to below 6.2% in the year 2013-14 after reducing the impact of high cost deposits. For the next year the bank expects 17-18% growth in credit  and 18-20% growth in savings deposits, according to her.

Responding to a question on the proposed capital infusion of Rs 1,500 crore from the government, Panse said it is expected to be taken up by the government when it presents the supplementary budget.