Thursday, May 2, 2013

Andhra Bank Q4 net up 1.5%, costs drag

May 3,2013,Hyderabad-

State-owned Andhra Bank is expecting some stress on its performance even in fiscal 2013-14 due to prevailing tough macroeconomic conditions. The bank has already suffered a margins dip in the just-ended year due to a variety of reasons, including slippages in the asset quality.

It reported a marginal 1.5% rise in net profit at Rs 345 crore for the last quarter of 2012-13 due to higher provisioning and rise in operating costs. Its net profit in the corresponding period last fiscal stood at Rs 340 crore.

"We expect deposits to grow by about 18% and advances by about 20% in the current financial year. However, margins are likely to remain under pressure as we expect the cost of deposits to remain high. The net interest margin (NIM) is expected to be at about 3%.

In case the rate cut is aggressive in the (RBI) policy, the pressure would further mount," said B A Prabhakar, chairman and managing director.

The lender's NIM stood at about 3.21% for the year ended March 2013, down 46 bps. For the same period, the bank's gross NPA was at about Rs 3,714 crore as against Rs 1,798 crore a year ago. Net NPA, too, climbed sharply to Rs 2,409 crore against Rs 755.85 crore. The bank's net profit was down 4.13% at Rs 1,289.13 crore compared with Rs 1,344.67 crore a year earlier.

According to Prabhakar, the overall macroeconomic conditions, in addition to inflationary pressures, interest rates and sluggishness in project finance offtake, took a toll on the bank's performance. The provisioning towards NPA too has affected the balance sheet on the bottom line. The bank had to make provisioning for the wage settlement and pension payments for its employees.

For now, the bank is keen on improving its advances to about 18.2% against the

industry average of about 14%. However, it sees growth coming mainly from sectors

like agriculture, retail and micro, small and medium enterprises (MSME) segments instead of corporates. In fact, the bank has been working on this shift for some time now. "The corporate sector portfolio is already down to about 53% from the earlier 57%. We will bring it further down to about 50%," Prabhakar said.

As for asset quality, the slippage is attributed to a lacklustre show in some of its large corporate accounts. The bank has also admitted that high exposure to the power sector – at about 14% – too was a drag. "It's a legacy issue and cannot be corrected overnight," Prabhakar said.

Andhra Bank is also one of the key lenders to the beleaguered Deccan Chronicle Holdings (DCHL) with an exposure of about Rs 200 crore. The bank has already initiated process under the provisions of the SARFAESI Act, 2002 to recover the dues. "We have initiated the process and as per the procedure, we would liquidate the collateral to recover the dues," he said.

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