Andhra Bank to focus on SME sector, agri credit

Reports marginal rise in net profit at Rs 345 crore in Q4 last fiscal

Hyderabad : Alarmed by rising non-performing assets (NPAs) in the credit extended to large and medium enterprises, Andhra Bank is gradually shifting its focus towards non-vulnerable sectors such as agriculture and small and medium enterprises.

"In order to reduce our exposure to corporate debt and insulate the bank from impact of economic slowdown, we have already started shifting focus towards agriculture and SME sectors. As a result, the corporate loans now account for 53 per cent of the total loan portfolio as against 57 per cent some time back, " B A Prabhakar, Chairman and Managing Director, Andhra Bank, told media after announcing fourth quarter financial results here on Thursday.

The State-owned bank posted 1.5 per cent upswing in net profit at `344.58 crore for the fourth quarter ended on March 31, 2013, as compared to `339.68 crore during the corresponding quarter in the previous year. It blamed higher provisioning and rise in operating costs for lower net profit.

"Last year the environment was not very conducive for business growth. We did not see any new projects coming up. The interest rates continued to be very high last year and so was inflation and we did not see much of demand for project finance," the CMD said.

The bank's total income during the quarter went up 15 per cent to `3,713 crore from `3,229 crore in the corresponding period last year. There was a jump in employee cost which stood at `381 crore and other operating expenses at `213 crore during the fourth quarter against `319 crore and `164 crore in the last quarter of FY-12.

For the entire financial year ended March 31, 2013, total income was at `13,957 crore against `12,199 crore in 2011-12 while the net profit went down to `1,289 crore against `1,345 crore in FY-12.

Prabhakar admitted that it was a stressful year for the overall business growth and it might remain so in the current fiscal as well if the economic indicators continued to remain bleak. "Net profit has come under pressure because of the provisioning we have made last year," he added.A The bank set aside `615 crore towards provisioning for non-performing assets for the last fiscal against `482 crore in the previous year.

The bank expects its margins to come under pressure in the current fiscal and the Net Interest Margin (NIM) may dip by 20 basis points. "The margins are likely to be under pressure as the cost of deposits continues to be high. If there is any decline in the base rates, that would adversely affect margins. I would say we can maintain around 3 per cent NIM for the current year," he said.

The bank expects its deposits to grow at 18 per cent while the credit growth is pegged at 20 per cent during FY-14.