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Analyst Meet / AGM - Analyst Meet

Expects loan growth at 12-13% for FY2018

Andhra Bank

16-Feb-2017, 09:45
Andhra Bank conducted an analyst meet on 16 February 2017 to discuss the financial results for the quarter ended December 2016. Suresh Patel, Managing Director and CEO of the bank addressed the call:

Highlights:

Business of the bank increased 9% to Rs 305770 crore at end December 2016, driven by deposits rising 12% to Rs 169799 crore, while advances grew by 4.5% to Rs 135971 crore.
Retail credit portfolio increased 14% driven by 19% surge in the housing loan book. Priority sector advances of the bank improved 7%, while constitute about 41.6% of Adjusted Net Bank Credit at end December 2016, against the norm of 40%. The NPA for the retail loans segment are below 2%.
On loan growth front, the bank is strongly focusing on retail agriculture and MSME loan segment. Thus, the share of corporate loan book has declined from 47.7% to 45.4% during calendar year 2016.
Bank expect loan growth to be into single digit for FY17, while expect loan growth to pick up to 12-13% in FY18.
The interest income of the bank was impacted due to reduction in base rate and MCLR. The interest income reversals of Rs 190 crore on account of non accrued interest income in SDR and S4A accounts in Q3FY2017 also impacted interest income of the bank. The RBI circular in November 2016 asked banks to reverse non-accrued interest income into SDR and S4A accounts.
The employee expenses were mainly boosted by higher employee benefits provisions. The higher employee expenses and lower interest income pushed up cost to income ratio of the bank to 50% in Q3FY2017.
Despite asset quality review (AQR) of the RBI, the bank has maintained profitability though smaller in size which helped to avoid erosion in net worth.
The bank has raised capital of Rs 1000 crore from tier I bond and Rs 900 crore through tier ii bonds in FY17 so far, while also requested the government for infusion of capital.
Post RBI AQR, the bank has witnessed fresh slippages of Rs 11000 crore during last five quarters. Gross NPA ratio of the Bank increased to 11.88% at end December 2016 from 7% end December 2015.
About 90% of NPAs are in Rs 1 crore and above account.
However, the bank has substantially reduced fresh slippages of loans. The fresh slippages of loans dipped below Rs 1000 crore in Q3FY2017, much below expectations of Rs 1500-2000 crore.
The restructured advance book of the bank stood at Rs 8439 crore at end December 2016. The slippages from restructured advance book to NPA category stood at Rs 3187 crore in 9MFY2017.
Under Strategic Debt Restructurings (SDR) scheme, bank has exposure to 8 accounts with outstanding balance at Rs 1352 crore. Of these, 1 account with exposure of Rs 160 crore has slipped to NPA category.
Under 5/25 refinancing scheme, the bank has exposure to 19 accounts with outstanding balance at Rs 2330 crore, of which 2 accounts are new.
As per the bank, the worst is over in terms of asset quality, while its still remains cautious on fresh slippages of loans.
CASA deposits of bank were boosted by deposits of old cash notes after demonetisation. The bank has received old notes of Rs 24000 crore. The bank has retained 80% of fresh saving account deposits in Q3FY2017, while bank expects to maintain 50-60% of these deposits in Q4FY2017.
The bank has slowed down the pace of new branch addition, while it's focusing on achieving earlier break even for existing new branches. Employee strength of the bank stood at 21000 at end December 2016.
The bank has laid down strong focus on improving operating profit to meet the provision requirement. As per the bank, the provision for aging of NPA is going to be major problem for the bank sector ahead.