As NPAs rise, Allahabad Bank shifts focus to retail, agri loans

On the road to recovery from losses, state-run Allahabad Bank has drawn up a revival strategy that would see the predominantly corporate sector lender shift mostly to retail and micro loans while focusing on the recovery of bad loan and reduce costs.

"This year our strategy would be to go for NPA recovery, re-balance the loan book – from a highly skewed corporate loan portfolio to a diversified book – which will consist of small, micro and agriculture loans. We would be focusing on these areas through our extensive network of branches," the bank's new managing director Usha Ananthasubramanian said after the announcement of the bank's fourth quarter earnings.

With total income at Rs 5,105 crore for the March quarter, marginally down from previous year's Rs 5,051 crore, the Kolkata-headquartered bank has reported Rs 111 crore net profit against a loss of Rs 581 crore in the year-ago period, mainly on account of income from treasury operations.

The bank has been making a steady profit since the September quarter when it reported a positive bottomline of Rs 65 crore which increased to Rs 75 crore in the December quarter.

But like most other banks, the non-performing assets continue to haunt Allahabad Bank, with net NPA ratio touching 8.92% during the March quarter from 6.76% a year ago.

High level of NPAs coupled with negative return on assets are the two major factors behind Reserve Bank of India putting prompt corrective actions (PCA) on some public sector banks like UCO Bank and IDBI Bank.

The consistency in profit making coupled with a positive return on assets might save Allahabad Bank from becoming a fit case for PCA that severely restricts new business expansion.

"We have not received any communication from RBI so far on this," she said.

Low-cost CASA or current and savings account deposits with least dependence on bulk deposits and cost minimisation are some of the areas Allahabad Bank would be focusing on.

"We are a bit uncomfortable with our costs and it would be our target to bring down the cost to income ratio from 52.24% during the quarter to below 50%," she said.

The re-balancing of loan book has already started happening, she said even as corporate have started shunning conventional loans from PSU banks and look for cheaper alternatives.

...& ANALYSIS

• Bank’s total income in the January-March quarter was Rs 5,105 crore, marginally down from previous year’s Rs 5,051 crore
   
• To focus on low-cost current and savings account deposits with least dependence on bulk deposits and cost minimisation
   
• The bank has been making steady profits since September quarter when it reported a positive bottomline of Rs 65 crore