Allahabad Bank returns to profit as provisions fall

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Published: August 1, 2019 1:33:23 AM

Public sector lender Allahabad Bank on Wednesday reported a net profit of Rs 128 crore for the first quarter ended June 30, against a net loss of Rs 1,944.37 crore in the same period a year ago, on the back of over 50% decline in provisioning for bad loans.

Notably, earlier this month Allahabad Bank reported a fraud of Rs 1,774.82 crore by Bhushan Power and Steel (BPSL).

Public sector lender Allahabad Bank on Wednesday reported a net profit of Rs 128 crore for the first quarter ended June 30, against a net loss of Rs 1,944.37 crore in the same period a year ago, on the back of over 50% decline in provisioning for bad loans.

The Kolkata-headquartered lender, which had come out of the prompt corrective action (PCA) framework of the Reserve Bank of India (RBI) in February this year, had reported a net loss of Rs 3,834.07 crore for the last quarter of the last fiscal.

Operating profit during the June quarter witnessed a meagre 3.6% year-on-year rise to Rs 859.55 crore from Rs 829.81 crore in the corresponding period last fiscal with net interest income (NII) de-growing 10.2% y-o-y at Rs 1,530.10 crore for the period under review, according to a stock exchange filing.

Non-interest income, however, jumped twofold y-o-y at Rs 424.38 crore. Total income remained flat at Rs 4,747.49 crore compared with Rs 4,794.04 crore for the June quarter last fiscal. As on June 30 this year, the lender’s net interest margin stood at 2.85%, an improvement of 27 basis points (bps) quarter-to-quarter (q-o-q). Provisions and contingencies fell 63.5% y-o-y to Rs 1,008.80 crore for the first quarter of FY20 from Rs ,2762.82 crore in the corresponding period of FY19. During the period under review provisions for non-performing assets (NPAs) saw around 57% y-o-y decline at Rs 1,102.30 crore against Rs 2,590.37 crore for the corresponding period last fiscal.

During the April-June period, gross NPAs in absolute terms stood at Rs 28,703.47 crore against Rs 28,704.78 crore in the January-March period this year. Gross NPA as a percentage of total loans fell 12 bps to 17.43% from 17.55% during the previous quarter. During the period under review net NPA ratio, however, increased 49 bps sequentially at 5.71%. The bank said as per RBI’s directions for initiating the insolvency process – provisioning norms, in respect of accounts covered under provisions of the Insolvency and Bankruptcy Code (IBC), no additional provisioning was required to be made for FY19 and the first quarter of FY20.

“However, an amount of Rs 874.62 crore was additionally provided on account of declaration of fraud in loan account in the power and steel sector during quarter-II of current financial year,” it added.

Notably, earlier this month Allahabad Bank reported a fraud of Rs 1,774.82 crore by Bhushan Power and Steel (BPSL). Later, it also reported a borrowal fraud of the bank’s exposure in SEL Manufacturing (SELM), involving a total amount of Rs 688.27 crore. SELM is a Ludhiana-based textile company.

The bank’s board on Wednesday approved raising equity capital by an amount aggregating up to Rs 2,000 crore through Qualified Institutions Placement (QIP), subject to all other requisite approvals in this regard. Its CRAR as on June 30, 2019, was 12.55% out of which CET 1 was 9.68% and AT1 was 0.03% and Tier-II CRAR was 2.84%. The bank’s shares closed at Rs 37.80, down 3.20% on BSE.

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