This covers sale of a dozen 'surplus' properties, of the entire stake in Universal Sompo General Insurance and by divestment in ASREC, an asset reconstruction company (ARC). The bank expects to raise about Rs 8 bn through sale of the entire 28.52 per cent stake in Universal Sompo and about Rs 7 billion from the 12 properties. And, Rs 300 million from the ASREC stake sale, N K Sahoo, executive director, told Business Standard.
Allahabad Bank has been hit hard by a surge in bad loans and is currently under the Prompt Corrective Action (PCA) clamp of the Reserve Bank of India. It has formed a committee to look into divestment of non-core assets.
“We have revised our divestment policy. A sub-committee of the board (of directors) will take decisions on divestment. We have identified 12 surplus properties and put these for sale. And, have reached an agreement with Indian Overseas Bank to come out fully from Universal Sompo by taking joint action,” said Sahoo. The present shareholding agreement allows both IOB and Allahabad Bank to completely exit at one go from the insurance company.
The bank is also in the process of closing its Hong Kong branch, which would release some capital. This apart, the bank says it has identified 47 accounts for sale to ARCs, with about Rs 6 billion of dues. It also aims to relocate around 100 ATMs and merge 15-odd branch offices.
On PCA exit Sahoo says they have stepped up on loan recovery and expect to come out of the PCA ambit with respect to net non- performing assets (NPAs) by the end of this financial year. At the end of the June quarter, the first one (Q1) of 2018-19, the net NPA ratio improved to 7.32 per cent, from 8.96 per cent in the same period last year. Sahoo says the hope is to reduce net NPAs (NNPAs) below six per cent by the final quarter.
“Out of five thresholds under PCA, the bank is in threshold-2 in four parameters. In respect of NNPAs, we have done exceedingly well,” he said.
Under the PCA, the bank has to meet quarterly targets set for it with respect to five parameters. These being (a) reduction of risk-weighted assets; (b) proportion of credit risk-weighted assets to total assets; (c) on cash recovery; (d) slippage and (e) cost to income ratio. Of these five, as on end-June, it had met four. The exception was cost to income ratio, which rose from 53 per cent to 56.7 per cent.
The bank recently got a recapitalisation infusion of Rs 17.9 billion from the central government and has request another Rs 50 billion this year - “Rs 28 billion for Q2 and Rs 22 billion by Q3”, said Sahoo. If market conditions are conducive, it will go for Qualified Institutional Placement, he said.
The bank expects four or five bad loan accounts to be resolved under the insolvency law this quarter.