Indian Banks

Andhra Bank, one of the leading public sector banks in the country, expects to achieve a net profit of Rs 1000 crore by the end of the current fiscal.

The Hyderabad-based bank is also eyeing a total business of Rs 1.3 lakh crore by the end of 2009-10.

Addressing media persons A A Taj, executive director, Andhra Bank said, “During the April-December period of this fiscal, the bank has already clocked net profit of Rs 806 crore, a 78.32 per cent jump over Rs 452 crore achieved in the corresponding period of the previous fiscal. We hope to reach a net profit of Rs 1000 crore by the end of this fiscal.”

The bank’s total business touched Rs 1,17,899 crore for the third quarter ended December 31, 2009 which is a growth of 23.04 per cent over the same period of previous fiscal. Of this total business, deposits stood at Rs 66,547 crore while advances reached Rs 51,352 crore, recording a growth of 23.7 per cent and 22.19 per cent respectively over the same period of the previous fiscal.

Stating that the bank has maintained its consistent performance on the asset quality front, Taj said, the gross NPA (Non-Performing Asset) reduced from 0.89 per cent to 0.87 per cent whereas the net NPA came down to 0.17 per cent from 0.21 per cent.

On the possibility of the bank raising interest rates in the wake of the recent hike in cash reserve ratio by the Reserve Bank of India by 75 basis points, he said, “We don’t see any possibility of an upward revision in interest rates at least till June this year as there is enough liquidity in the system.”

Taj pointed out that Andhra Bank was focusing more on retail deposits rather than bulk deposits and the bank was giving emphasis on agriculture, Micro, Small and Medium Enterprises (MSMEs) and retail credit.

On branch expansion, he said that the bank has opened 112 branches across the country during the April-December period of this fiscal, taking the bank’s total branch network to 1544. Plans are afoot to open 10 more branches by the end of March 2010.

Talking on financial inclusion, Taj said, “Andhra Bank has achieved 100 per cent financial inclusion in Srikakulam and Guntur districts of Andhra Pradesh. Our smart card operations have begun on a large scale and we have already issued over 50,000 smart cards to the customers in the rural .”

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Indian Overseas Bank (IOB) reported a 73.81 per cent drop in net profit for the quarter ended December 31, 2009, to Rs 101.7 crore as compared with Rs 388.44 crore during the same period last year.

Total income dropped 11.74 per cent during the third quarter to Rs 2,828.65 crore from Rs 3,204.90 crore, a year ago.

The bank attributed the drop to increase in non performing assets, provisions for wage arrears and decline in treasury income.

“The treasury income came down by Rs 365 crore to Rs 17 crore during the third quarter from Rs 382 crore, a year ago,” said SA Bhat, chairman and managing director .

It made a provision of around Rs 130 crore towards arrears and wages. Net NPA increased to Rs 1,690 crore from Rs 920 crore as on December 31, 2008.

Bhat said the bank was planning to use the Sarfaesi Act to sell some of the assets. “We hope to recover 15-20 per cent of the NPA by selling some of the assets to Asset Reconstruction Company (Arcil) and to other asset reconstruction companies.”

IOB is looking to strengthen other fee-based income. “Our immediate focus will be on life insurance,” he said, adding last year the income through life insurance was around Rs 15-20 crore, which will be increased to Rs 75 crore. It has decided to look at long term policy, which will bring more income.

The other areas, which the bank is looking at are non-life insurance and mutual fund.

“We had set a target to grow at 20 per cent during the current fiscal, compared with the last fiscal, but now expect to grow only 15-16 per cent,” said Bhat.

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With a modest rise in net interest income (NII) and decline in treasury income, Bank of Borada (BoB) has posted a net profit growth of 17.5 per cent to Rs 832.49 crore for the quarter ended December compared to Rs 708.37 crore recorded in the same period of the previous year.

Its net profit was mainly driven by a rise in core fee income, which went up by 33.6 per cent to Rs 230.92 crore during the reporting period. NII, which is the difference between interest earned and interest paid, was up only 9.5 per cent during the quarter. Other income, on the other hand, declined by 22.07 per cent to Rs 659.65 crore resulting in its total income coming down by 2.38 per cent to Rs 4,836.62 crore.

Profit on sale of investment came down to Rs 139 crore during the period from Rs 414 crore in the comparable period last year mainly due to rising bond yields, the bank said. However, profit on sale of investment was aided by a one-time gain of Rs 69 crore during October –December of 2008-09 due to winding up of the bank’s holding in one of its subsidiaries.

Margins, however, improved sequentially due to increase in low-cost deposits. Net interest margins (NIMs) from domestic operations in the quarter stood at 3.4 per cent, up from 2.89 per cent recorded in the second quarter. Chairman MD Mallya said NIMs might further improve by a few basis points (bps) in the fourth quarter. Fall in cost of deposits by about 90 bps from domestic operations also helped in improving the margins.

The low-cost deposit or the current and savings account deposit (Casa) rose 24.6 per cent as of December-end, and as a result, the share of Casa to total deposits increased to 37 per cent from 36.17 per cent September-end.

Net advances increased to 23.5 per cent to Rs 1,56,171 crore as of December-end, while deposits went up by 27.6 per cent to Rs 215,117 crore. The bank is aiming for a 21 per cent increase in advances and 22 per cent increase in deposit in 2009-10.

Gross non-performing asset (NPAs) increased to Rs 2,260.27 crore as of December-end from Rs 1,921.42 crore in the year-ago period, and net NPA increased to Rs 487.68 crore from Rs 472.58 crore. However, both gross and net NPA ratios declined to 1.43 per cent from 1.5 per cent and 0.31 per cent from 0.37 per cent, respectively.

Provision coverage ratio of the bank stood at 78.42 per cent.

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State-owned lender Andhra Bank reported a 29.1 per cent increase in net profit to Rs 275 crore for the quarter ended December 31, 2009, as compared with Rs 213 crore during the same period last year.

Total business was up 23.03 per cent to Rs 1,17,899 crore, including Rs 66,547 crore deposits and Rs 51,352 crore advances, during the quarter from Rs 95,822 crore last year.

Speaking to the media here, Andhra Bank executive director Anil Girotra said yields on advances contributed to the growth during the quarter as retail, MSME and agriculture sectors grew 40.73 per cent, 53 per cent and 27.2 per cent respectively.

Net interest income during the quarter increased to Rs 583 crore, up 29.26 per cent, from Rs 451 crore during the same period last year. Non performing assets was up to Rs 446.95 crore as compared with Rs 373.36 crore.

Other income, however, was down to Rs 224 crore sequentially from Rs 233 crore during September as treasury income declined 30.88 per cent to Rs 47 crore from Rs 68 crore.

Girotra said the bank need not raise further capital as credit to risk weighted assets ratio (CRAR) was 14.95 per cent, as against the minimum 9 per cent prescribed by the Reserve Bank of India. This was despite making Rs 37.5 crore provisions for enhanced salary and pension during the quarter. Similar provisions would be made during the current quarter too depending on the agreements with the Indian Banks Association, he said.

The bank ceased to be a corporate agent for Life Insurance Corporation. It commenced operations of IndiaFirst Insurance Co Limited, a life insurance joint venture of Andhra Bank with Bank of Baroda and Legal and General (UK), this month. “Insurance will be a focus area of our fee-based services,” he said.

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