Allahabad Bank: Q4 Net Profit Up By 25%, But Asset Quality Declines

Allahabad Bank has come out with its financial results for the fourth quarter and year ended on 31 March 2014. The bank was able to record a considerable growth in net profit during Q4FY14 on yearly basis due to rise in NII and marginal increase in its provisions and contingencies. Net interest income (NII) of the bank went up by 28% to Rs 1352.8 crore in Q4FY14 against Rs 1056 crore in same quarter of last year. NII of the bank showed a good growth on account of slow growth in interest expended that went up by 8.2% to Rs 3458.7 in Q4FY14 (compared to interest earned, up by 13.2% to Rs 4811.5 crore in Q4FY14). 

However, operating profit of the bank grew by 8.8% yoy only due to decrease in other income and sharp increase in other expenses of the bank. Other income fell by 18.8% to Rs 426.2 crore in Q4FY14 from Rs 524.5 crore in Q4FY13 while other expenses grew by 28.2% to Rs 344 crore in said quarter.

The bank’s net profit grew by 25% yoy to Rs 157.75 crore in Q4FY14 against Rs 126.15 crore in same period last year. Despite of its low Provision Coverage Ratio (PCR) which stands at 46% (far below the mandatory PCR i.e., 70%) as on 31 March 2014, the bank has increased its provision by only 2.7% on yearly basis during the said period.

 On assets quality front, the bank presented disappointing set of numbers as its gross non-performing assets ratio (NPAs) marginally increased to 5.73% of total lending during Q4FY14 from 5.47 in Q3FY14. While net NPA ratio did not show any major improvement and came down by only 4 bps at 4.15% during the said quarter against 4.19% in Q3FY14. 

Coming to whole year performance of the bank, NII of the bank stood at Rs 5342 crore during FY’14 against Rs 4892 crore in FY’13 with a growth of 9.2%.However, net profit of the bank fell by 2% to Rs 1188 crore in the said year against Rs 1211 crore in FY’13. Advance of the bank grew by 6.5% to Rs 1.38 lakh crore in FY’14 from Rs 1.29 lakh crore in FY’13 and deposits of the also showed similar growth rate and went up by 6.7% to 1.90 lakh crore in FY’14.

At CMP of Rs 95 per share, the bank is trading at 0.53x of its adjusted book value. Even though the bank has posted a considerable growth for the quarter ended and year ended 31 March, 2014, its PCR is at 46% which indicates that the bank needs to make huge provision in coming year which will hit bottom line. Hence, we advise our readers to stay away from the counter of the bank.