Analysis - Allahabad Bank

Spurt in other income saves the bottomline

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4 Allahabad Bank: Financial Results

Allahabad bank reported 28% increase in Net profit at Rs 365.05 crore for the third quarter ended Dec'07. The Net interest income for the quarter declined by 8% at Rs 445.28 crore. Nevertheless 281% spurt in other income at Rs 372.92 crore saves day. The operating profit for the quarter under review jumped by 60% to Rs 521.12 crore.

Business Highlights

The Business of the Bank has crossed Rs 1,10,000 crore mark as on Dec'07 to reach Rs 113835 crore as against Rs 95237 crore as on Dec'06, an increase of 20% y-o-y.

Total Deposit of the Bank went up by 20% to reach Rs 68044 crore and Gross Advances went up by 18% to Rs 45791 crore as on Dec'07.

Market Share in aggregate deposits stood at 2.24% and Market share in advances stood at 2.09% as on Dec'07.

Low-Cost Deposits of the Bank grew by 13.60% on Year-on-Year basis.

• Cost of Deposits was 6.55% as at December 2007 as against 5.55% as at December-end 2006.Yield on Advances grew to 10.76% as at December-end 2007 up from 9.21% in December 2006. During this period, while Cost of Deposit was up by 100 basis points, yield on advances increased by 155 basis points.
  
• Net Interest Margin (Spread to Average Working Funds) stood at 2.90% as on December-end 2007 compared to 2.88% in December-end 2006

• Gross NPA to Gross Advances reduced to 2.06% as at Dec.-end 2007 from 3.06% as at Dec.-end 2006. It was 2.61% as at March-end 2007.
  
• Net NPA to Net Advances ratio reduced to 0.67% as at December-end 2007 from 1.07% as at March-end 2007 and 0.72% as on corresponding date last year.
  
• Provision Coverage Ratio was 65.16% as on 31.12.2007.
  
• Capital Adequacy Ratio stood at 12.84%. The Bank is comfortably placed for compliance of new Basel II norms by target date of 31.3.2008.
  
• Return on Assets (ROA) went up to 1.50% during April-Dec., 2007 compared to 1.42% during the same period last year.
  
• Operating Expenses to Average Working Fund reduced further from 1.69% at December-end, 2006 to 1.53% as at 31.12.2007 despite pressure.

• Establishment Cost to Total Expenses went down to 12.22% as at Dec.-end 2007 from 15.18% as at Dec.-end 2006.

• Gross Credit to Total Deposit Ratio was 67.30% as on 31.12.2007.

Performance for the quarter ended Dec '07

Allahabad Bank for the third quarter ended Dec'07 recorded 21% increase in the Interest earned at Rs 1583.49 crore aided by 26% increase in Interest on advances at Rs 1129.54 crore. However the interest expended for the period increased by 39% to Rs 1138.21 crore plunged the Net Interest Income (NII) by 8% to Rs 445.28 crore.

Despite decline in NII, Net total income increased by 40% to Rs 818.20 crore with other income increasing spurting by 281% to Rs 372.92 crore. Commission & Exchange that form part of other income grew by 30.50% to Rs 295.47crores in Dec' 07 compared to Rs 226.41 crore in Dec' 06.

The operating expenses increased by 16% to Rs 297.08 crore with the staff cost increasing by 13% to Rs 180.03 crore. Despite increase in operating expenses, spurt in other income took the operating profit for the quarter up by 60% to Rs 521.12 crore.

The provision and contingencies (including provision for NPA) stood at Rs 125.01 crore compared to write back of Rs 8.37 crore in the corresponding previous quarter thus, constraining the PBT to increase by 18% to Rs 396.11 crore. However with the Provision for tax decreasing by 36% to Rs 31.06 crore, Net profit stood at Rs 365.05 crore as against Rs 286.13 crore, recording a y-o-y growth of 28%.

Performance for the nine months ended Dec '07

The Net interest income for the nine months ended Dec'07 increased by 6% to Rs 1338.24 crore. Other income increased by 137% to Rs 596.15 crore taking the Net total income up by 28% to Rs 1934.39 crore. Operating profit for the period increased by 43% to Rs 1109.55 crore after accounting for Rs 824.84 crore of operating expenses (up by 11% on y-o-y). Provision and contingencies increased by 35% to Rs 181.35 crore and tax provision increased by 584% to Rs 122.96 crore. Thus the Net profit for the period recorded 29% growth at Rs 805.24 crore.

Retail Banking

The total outstanding amount under retail credit as on 31.12.2007 was Rs.7233 crores.

The Bank has bouquet of Retail Credit Products to cater to the needs of all sections of the society.

The Bank has 126 Retail Banking Boutiques (RBBs), which are solely focused on Retail Lending.

Housing Finance to individual accounts stood at Rs.3024.86 crores as on 31.12.2007, registering a growth of about 6% over December 2006.

Branch Expansion

During the calendar year of 2007, 100 more branches have been opened throughout the country taking total number of branches from 2042 to 2142 of which rural are 983 (46%), semi-urban 402 (19%), urban 450 (21%) and metropolitan 307 (14%). The Bank has already in hand 116 authorizations for opening of new branches. Bank's plan is to expand in areas where the Bank's presence is not very much visible now and where business potentiality is good.

The Bank has connected 211 ATMs with 239 branches on its network. With membership of VISA and National Financial Switch, our card member can now access over 16500 ATMs all across the country.

Future Initiatives

• After the first overseas branch at Hong Kong, the Bank is planning to expand further in other countries having economic potentiality.
  
• Aggressive marketing of retail products, cross-selling of insurance and mutual fund products with more thrust on income generation.
  
• Renewed thrust on prompt and courteous Customer Service and Grievance Redressal.
  
• Steadily bringing eligible branches under Core Banking Solutions (CBS) platform.
  
• The Bank plans to come out with Rs.300 crore perpetual Bond during the last quarter of the year after obtaining approval of the Board.