Allahabad Bank Posts Poor Q1FY14 Results

Allahabad Bank, the public sector bank headquartered at Kolkata, announced a bad set of numbers for its Q1FY14. The net profit of the bank saw a dip of 20% on a yearly basis to Rs 413.09 crore for the quarter under review. This was despite a yearly increase in other income by 62% to Rs 501.3 crore. A flat growth in the net interest income, higher operating expenses and an increase in provisioning has led to such a fall in the net profit.

The net interest income (NII) of the bank has remained flat on a yearly basis and stood at Rs 1312 crore for Q1FY14 against Rs 1306 crore posted in Q1FY13. The gross credit has increased by 16.73% in the same period. The operating expense has increased by 20% on a yearly basis to Rs 791 crore for Q1FY14 against the street expectation of Rs 765 crore. Even the provisions were supposed to increase at a slower pace of 8.6% on a yearly basis, but it went up by 20% to Rs 445.5 crore.

The real dampener in the result was a rise in the gross and net NPAs. On an absolute basis, the gross NPA of the bank has increased by 185% on a yearly basis to Rs 6164 crore, while the net NPA has increased by 313% in the same period to Rs 4921 crore. In terms of percentage too, they have increased by 86 basis points and 68 basis points on a sequential basis and stood at 4.78% and 3.87% respectively.

In today’s trading, the stock of Allahabad bank dropped by 5% and is currently trading at Rs 71.9, which is 0.33x its book value. Looking at the lower valuations and bad financial performance, we remain neutral on the bank’s stock.