Allahabad Bank does well despite NPA woes

Allahabad Bank’s net profit fell over 63 per cent to Rs 65.03 crore for the September quarter as the lender parked aside a significant amount to meet bad loans and contingencies, while income decreased.

The Kolkata-headquartered bank had registered a net profit of Rs 177.10 crore in the July-September quarter of the previous financial year, 2015-16.

Its total income decreased to Rs 5,051.61 crore during the second quarter of 2016-17 as against Rs 5,317.06 crore in the same period a year ago, the state-owned bank said in a regulatory filing.

As per RBI’s guidelines on cleaning-up bad assets, lenders have been keeping aside higher amounts towards non-performing assets (NPAs) or bad loans, which is mainly responsible for majority of the public sector banks reporting lower profits or losses.

“In compliance with RBI directives on asset quality review (AQR), Bank has made incremental quarterly provision of Rs 41.46 crore (Rs 87.80 crore in the half year at 5 per cent of the outstanding amount) in CDR restructured standard accounts for the quarter ended September 30, 2016,” it said.

For quarter under review, Allahabad Bank’s provision for bad loans and contingencies was up at Rs 814.40 crore, as against Rs 703.10 crore a year ago.

Gross NPAs rose to 12.28 per cent of gross advances as on September 30, 2016, up from 5.26 per cent a year earlier. Net NPAs soared to 8.59 per cent of net loans, from 3.61 per cent year ago.

In absolute terms, gross NPAs were at Rs 19,094.53 crore against Rs 7,985.75 crore. While, net NPAs were at Rs 12,800.45 crore, up from Rs 5,359.90 crore.

Allahabad Bank scrip closed 2.30 per cent down at Rs 72.20 on BSE.

Public sector lender Punjab National Bank‘s (PNB) second quarter profit is seen falling 32.8 percent year-on-year to Rs 417 crore, according to consensus estimates. 

Net interest income, the difference between interest earned and interest expended, may decline 12.9 percent to Rs 3,765 crore on yearly basis. Key things to watch out for would be recovery, slippages and stressed assets.

There was a sharp decline in slippages at Rs 7,533 crore in Q1 against Rs 23,545 crore in Q4. Analysts expect the trend to continue in Q2 as well. 

Treasury gains may remain strong for the bank as government securities yield has declined by 49 bps in Q2FY17. If gross non-performing assets fall below 14 percent then that will be positive, feel analysts. In Q1, gross NPA was at 13.75 percent.