Andhra Bank 's second quarter net profit has doubled, up 105 percent, to Rs 144 crore against Rs 70 crore on a year-on-year basis. Gross NPA stood at 5.99 percent versus 5.98 percent and net NPA at 3.86 percent versus 3.89 percent on a sequential basis.
Discussing the company results, CVR Rajendran, CMD, Andhra Bank, said he expects asset quality to improve substantially in H2 and recovery from agri loan waiver in the next 2 quarters.
The bank had classified Rs 1,090 crore agri NPAs in the first quarter and saw interest being credited from interest reversal (in Q1), he said.
Net Interest Margin (NIM) has come in at 2.93 percent and Rajendran expects it to improve to 3 percent in the next quarter. He said the bank has been targeting gross NPA at 4 percent, but that looks difficult as there has not been much turnaround in infra NPAs. He expects GNPA to be closer to 5 percent.
Below is the transcript of CVR Rajendran's interview with CNBC-TV18's Sonia Shenoy
Sonia: What does the trend look like as far as asset quality is concerned? This time around your gross non-performing assets (NPAs) are at 5.99 percent. Do you see any improvement in asset quality in the second half of the year?
A: It should improve tremendously in the second part. Our major problem has come from the agricultural loan waiver scheme in both the states of Andhra Pradesh and Telangana. Recently both the governments have come out and declared about 25 percent of the amount to be paid during the current year in Telangana and 20 percent amount to be paid in Andhra Pradesh.
With that announcement the agricultural loans are getting repaid and getting renewed mostly in Telangana part now because Andhra is yet to pay the money. So if both the governments give the money, about Rs 1093 crore is NPA which we provided during the last year, and the interest reversal and provision on this account of Rs 393 crore provided during the first quarter of the current year which will completely get reversed in the subsequent quarters.
During this quarter alone I had a net benefit of about Rs 75 crore reversal of the interest which was reversed during the current year Q1. So Q3 and Q4 will reflect more of interest reversal happening that is interest being credited to the profit and loss account will happen which will help us in improving the profitability in Q2.
Sonia: On account of this loan waiver what is the quantum of farm loans that you had classified as NPAs?
A: First quarter we had classified Rs 1093 crore as NPA.
Sonia: So going forward since you are expecting to see a recovery from this 5.9 percent gross NPA level how much do you think it could recover by the end of the fiscal?
A: It should be at 5 percent even though we have a target of having 4 percent gross NPA and 2 percent net NPA is our internal target, it appears to be difficult at this point of time because infrastructure there is not much happening because major NPAs are coming from infrastructure, power and the iron and steel sector. So there is not much of turnaround happening in these sectors so a reasonable estimate could be we will be in a position to reach 5 percent in the gross NPA and less than 3 percent in the net NPA at this point of time.
Sonia: Can you tell us what your net interest margins (NIMs) were this quarter?
A: NIM is 2.93 percent for this quarter and we expect it to improve to 3 percent in the next quarter.
Sonia: What are the fresh slippages and the restructuring for this particular quarter?
A: Restructuring remains almost the same during the current year. Of course Rs 1000 crore of restructured accounts have moved into NPA that is why NPA numbers have gone up substantially.
We have sanctioned about Rs 399 crore on the restructured accounts which adds to the restructured portfolio and fresh restructuring during the current year is about Rs 533 crore. So all together it adds to almost Rs 900 crore to the restructured portfolio. About Rs 313 crore is the recovery in these accounts and Rs 318 crore is the upgradation in these accounts. So the opening balance of Rs 10784 crore it has come to 10665 crore, reduction over the opening balance.
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