In its traditional lending business, the concentration has been on triple A rated clients (rated, using internal benchmarks) which is partly responsible for the fall in net NPA to 2.4 per cent. In the third-quarter, the net NPA was 2.63 per cent, while the total recoveries from non-performing accounts is estimated to be Rs 50 crore for the full year. So far, the bank has managed to meet and exceed most of its projections like reducing NPAs, deposit mobilisation, credit offtake, gold trading, cash management services, etc. According to recent news reports, deposits have exceeded Rs 12,500 crore at an annual growth rate of around 35 per cent, exceeding the target ofRs 11,250 crore. The gold turnover has crossed Rs 5,500 crore during the year, against a target of Rs 5,000 crore. The bank's forex turnover has recorded a CAGR of 39 per cent. The CAGR in advances was 45 per cent, which crossed Rs 6,000 crore to around 6,300 crore as on March, 1999. The growth rates indicate that the last quarter has been better than the preceding one in terms of growth rates. But then, banks usually experience better volume growth in the last quarter, especially in the last month of the financial year. Growth rates in deposits and advances have been in single digits in the third quarter.

The management has maintained that it will be able to meet its earlier net profit target of Rs 210 crore. However, it is as unclear if the bank will take a charge for additional NPAs on state government guaranteed loans in accordance with the RBI requirements. The bank has already reported around Rs 167 crore in net profits till December 1998, and, in all likelihood, the net profit will fall short of thetarget. It is likely that the bank will report a net profit closer to Rs 185-190 crore for the full year, or a profit of just around Rs 20 crore for the final quarter. The charge to revenues in accordance with the second Narsimhan Committee recommendations could be as high as Rs 20 crore on account of government guaranteed loans as well as statutory provisions for standard assets. Higher employee cost as a result of the 12.25 per cent increase in basic wages following the IBA/unions settlement will also have to be accounted for in the last quarter.

Despite the good performance the critical factor will be to see the final provisions figure. Off-late, the bank has tended to slowdown its provisions for NPAs and, in the last nine months, has not increased the coverage beyond the low figure of 62 per cent of gross NPAs. The bank will benefit from the lower YTM for March 31, 1999, and will write back at least Rs 5 crore to revenues for which it provided on account of investment depreciation. It is as unclear ifany additional write backs on investment account will be made. Last year, the bank took a credit of Rs 33.05 crore to P&L on account of earlier depreciation on investment account. Despite the bank's impressive record, the stock has been an underperformer in the last six months owing to fears over reducing provisions for NPLs and the various provisions yet to be made.

Shaky outstandings: The weekend saw traders being bombarded with politically speculative news. This played a significant part in driving down sentiment considering the unusually large outstanding positions at the end of the week. The outstanding positions reflected within the badla settlement were just around Rs 980 crore, which seemed to be lower than the Rs 1,300 crore reported during the previous week.

But in reality, the badla positions were far higher if the scrips being traded in no-delivery are considered. Including the no-delivery stocks, the total outstandings were Rs 1,750 crore, or a higher outstanding by 770 crore, which isexerting considerable downward pressure on stock prices now, given the heightened uncertainty.