Andhra Bank's net up four-fold but NPAs challenge remains

Drastic reduction in cost of funds and increased interest income helped Andhra Bank register a more than four-fold jump in its net profit during the third quarter ended December 2014.

Its net profit during the quarter was Rs.202 crore against Rs.45.57 crore in the same period of 2013-14.

The core operating profit of the bank during Q3 stood at Rs.923 crore compared to Rs.522 crore during corresponding quarter of previous year.

The bank said its total income grew by 16.40 percent year-on-year, standing at Rs.4,540 crore compared to Rs.3,901 crore during Q3 of 2013-14. This comprised interest income of Rs.4,150 crore and non-interest income of Rs.390 crore.

The interest income grew by 15.30 percent and non-interest income by 28.70 percent year-on-year. The net interest income grew by 45.10 percent, from Rs.868 crore in Q3 of last fiscal to Rs.1,259 crore.

Chairman and managing director C.V.R. Rajendran told reporters that interest reversals of Rs.126 crore also contributed to the higher margin.

Total business of the bank stood at Rs.260,814 crore, an increase of 11.3 percent year-on-year.

The deposits grew from Rs.131,700 crore to Rs.142,078 crore, an year-on-year increase of 7.9 percent.

The advances grew by 15.7 percent - from Rs.102,644 crore to Rs.118,763 crore. The gross Non-Performing Assets (NPAs) of the bank stood at Rs.7,118 crore, which is 5.99 percent of advances while the net NPAs are at Rs.4,264 crore, 3.70 percent of net advances.

The CMD said unless economic turnaround happens, NPAs would be a challenge. "The economic turnaround has started happening in a slow way. Probably this will increase pace around budget time," he said hoping that over next one year, the NPAs will come down drastically.

He said if the bank was able to complete agricultural accounts rollover in Andhra Pradesh and Telangana to large extent, gross NPAs can come down to 5 percent.

The outstanding agriculture NPAs in Andhra Pradesh stood at Rs.882 crore and in Telangana at Rs.405 crore as on Dec 31, 2014.

Rajendran pointed out that historically Andhra Bank had only two percent NPAs in agriculture loans but today they stood at 6.6 percent.

The employees have taken up recovery of loans in a large way. Earlier it was done only by recovery staff but 18,000 employees are in the field to recover loans. The bank has 2.86 lakh NPA accounts and each employee has taken up 20 to 30 accounts.

Rajendran said only 1,038 NPA accounts were above Rs.1 crore while remaining were all below Rs.10 lakh.

The employees have been staging protest in front of the houses of defaulters. Asked about a film star who reportedly owe Rs.40 crore to the bank, Rajendran declined to name any defaulter. "There are both political stars and film stars among defaulters," he remarked.

He said if there were no NPAs and economy does well, Rs.1,600 crore to Rs.2,000 crore would be normal profit in a quarter for a mid-size bank like Andhra Bank.

The bank raised additional tier-I capital amount of Rs.500 crore through issuance of perpetual bonds during Q3. Stating that the bank has many sources of cheap funds, he said it planned to raise another Rs.500 crore before March this year.

Rajendran said if interest rates go down, the bank may raise Rs.1,000 crore to Rs.1,500 crore in the first half of the next fiscal.

He said the bank could also raise Rs.2,500 crore through foreign currency borrowing, provided funds are available cheaper.