Allahabad Bank Posted Dismal Result For Q4FY13

Allahabad Bank, the oldest joint stock company in India posted a very disappointed set of numbers on all fronts in Q4FY13. The net profit of the bank declined by a whopping 68.5% on a yearly basis to Rs 126.15 crore for the quarter ending March 31, 2013. This large decline in the net profit was primarily due to a decline in the net interest income (NII) and worsening of asset quality.

In Q4FY13, the NII of the bank witnessed a decline of 18% to Rs 1056 crore, on a yearly basis. The decline was largely due to lower yield on advances and no proportionate decline in the cost of deposits. Consequently, the net interest margins (NIM) of the bank saw a sharp decline of 72 basis points on a sequential basis to 2.03%. The other reason for the fall in NII was interest reversal.

Largely, it was the deteriorating asset quality that pulled down the profit of the bank. Provisions by the bank have increased by 44% on a sequential basis and 37% on a yearly basis to reach Rs 622 crore in the fourth quarter of FY13. The gross NPA and net NPA increased by a hefty 140% and 278% respectively, on a yearly basis. Sharp deterioration in asset quality was on account of higher slippages of Rs 2500 crore in the quarter under review against Rs 1000 crore in the previous quarter. A major portion of these slippages was bulky in nature (nine accounts contributed to around Rs 1600 crore).

In terms of percentage of advance, the gross NPA and net NPA of the bank was 3.92% and 3.19% respectively.

The shares of the bank are currently trading at Rs 126.4, discounting its book value by 0.6 times. However, looking at the performance of the company we recommend to stay away for the counter till asset quality stabilises.