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Andhra Bank shares slump, hit by surge in provisions

Provisioning for bad loans rose to Rs.150 cr from Rs.39.5 cr in year-ago quarter; profit fell to Rs.257 crore from Rs.303.17 cr
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First Published: Thu, Jan 24 2013. 01 57 PM IST
Much of the stress in Andhra Bank’s loan book in the December quarter can be attributed to infrastructure companies, say analysts. Photo: Pradeep Gaur/Mint
Much of the stress in Andhra Bank’s loan book in the December quarter can be attributed to infrastructure companies, say analysts. Photo: Pradeep Gaur/Mint
Updated: Thu, Jan 24 2013. 10 37 PM IST
Mumbai: Andhra Bank ’s stock slumped after the state-run lender reported an almost fourfold increase in provisions in the December quarter owing to a surge in bad debt that dragged profit down by 15% from the year-ago period.
The stock closed at Rs.110.65, down 6.59% on the BSE. The benchmark Sensex fell 0.47%, while the Bankex, the index of major bank stocks, fell 0.69%.
Money set aside for bad loans rose to Rs.150 crore from Rs.39.5 crore in the year-ago quarter, while profit fell to Rs.257 crore from Rs.303.17 crore in the same period last year, the lender said. Total income rose to Rs.3,469.21 crore from Rs.3,158.26 crore.
Net non-performing assets (NPAs) rose to 2.29% of advances in the quarter from 1.21% a year ago. In absolute terms, net NPAs more than doubled to Rs.2,023.32 crore from Rs.943.27 crore in the year-ago period.
Much of the stress in Andhra Bank’s loan book in the December quarter can be attributed to infrastructure companies, analysts said. Also, loans given to one large account may have turned bad, adding to the asset quality deterioration, they said.
Andhra Bank classified Rs.200 crore given to Deccan Chronicles Holdings Ltd (DCHL) as bad loans. The lender has commenced the process of recovery, which could take three-four months to be completed. The bank has restructured some of its loans to state electricity boards and infrastructure companies.
“Besides the bad loans, provisions made on restructured assets too added pressure to the asset quality. The bank provided Rs.105 crore on restructured loans in the December quarter,” said B.A. Prabhakar, chairman and managing director of Andhra Bank. According to Prabhakar, challenges remain on the asset quality front in the approaching quarters as well.
The affliction isn’t restricted to Andhra Bank alone. An unprecedented surge in NPAs has become a concern for India’s Rs.70 trillion banking system. Gross NPAs of 40 listed Indian banks rose to Rs.1.66 trillion in September, up 46.8% from the year ago.
Reflecting this stress in the system, Indian banks have been increasingly restructuring loans across sectors. Total loans recast through the corporate debt restructuring (CDR) channel alone crossed Rs.2 trillion in December, according to data from the CDR cell, a bank forum. The actual value of restructured debt will be higher as banks also recast loans on a bilateral basis with individual companies.
An analyst attributed the increase in Andhra Bank’s bad debt to money given to infrastructure firms. “The numbers are on the expected lines. There is more pain yet to come in some of the banks like Andhra Bank, especially from infrastructure loans,” said Vaibhav Agrawal, vice-president, research, at brokerage Angel Broking Ltd.
Also on Thursday, state-owned Vijaya Bank reported a marginal 1.9% increase in net profit to Rs.126.74 crore in the December quarter from Rs.124.27 crore in the corresponding quarter last fiscal. Total income rose to Rs.2,357.02 crore from Rs.2,173.92 crore. The stock fell 3.24% to Rs.58.30.
HT Media Ltd, publisher of Mint and Hindustan Times, competes with DCHL publications in some markets.
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First Published: Thu, Jan 24 2013. 01 57 PM IST
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