[T.S.R:17318] Andhra Bank-Signs Of Stress All Over

 Andhra Bank-Stuck In A Virtuous Cycle

If Telengana agitation was not enough, the provisions for pensions and gratuity of employees and arrears for those retired will not be a one time but a recurring liability. On top of all these costs, will be continued pressure to write-off loans for those taking political patronage whether or not they are able to repay loans once taken from the bank. To this extent all financials provided by PSU Banks are fudged and totally unreliable.

Strong business growth. Advances grew 27.3% yoy (8.9% qoq) and deposits 18.6% yoy (12.3% qoq), which was faster than the industry's 21% and 16% respectively. MSME and the large corporate segment grew 33% yoy each driving overall growth. Credit-to-deposits marginally dropped to 77.5% in 4QFY11 vs. 79.9% in 3QFY11.

 NIM improved but unlikely to sustain at current levels. NIM improved 10bps qoq (and 56bps yoy) to 3.7% due to a 50-bp rise in yields on advances. NIM for FY11 stood at 3.8%, vs. 3.2% in FY10. NIM is unlikely to sustain at current levels. We expect it to decline ~30bps over FY11-13 on the increase in cost of deposits due to the higher savings account deposit rate and an increase in the term deposit rate.

Asset quality stable on high NPA costs. Slippages were Rs1.9bn in 4QFY11 vs. Rs2bn in 3Q. Gross NPAs increased 14.1% qoq to Rs9.9bn. However, net NPAs declined 11.1% qoq due to the higher NPA costs. As a result, net NPAs were 0.38% and NPA coverage (including technical write-offs) improved sequentially to 84%. Restructured assets stood at Rs25bn, 3.5% of loans vs. 3.8% in 3QFY11.

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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