Andhra Bank’s Q4FY15 PAT was at R190 crore (2x y-o-y on a lower base), driven by healthy NIM, strong loan growth and lower credit costs.
Slippages during the quarter declined to a 4-quarter low of R770 crore versus R900 crore in Q3FY15. Agriculture GNPA declined 20% q-o-q to R1060 crore led by strong recoveries in AP/Telangana. Management is confident of recovering another R5-600 crore over the next couple of quarters.
Bank continued to report healthy NIM led by interest write-back on agriculture NPA recoveries from AP/Telangana. Management guided that the margins would remain at similar levels over the next few quarters.
Declining trend in slippages and zero restructuring pipeline were the key positives. Over FY13-14, Andhra Bank’s earnings were severely hit due to rising NPAs and further impacted in Q1FY15 due to a spike in Agriculture NPAs.
With clarity emerging on the farm loan waiver scheme and management’s focus on recoveries, we believe earnings would improve gradually going forward.