Allahabad Bank steady on growth path

The Bank has finalized its accounts for nine-month ended December 2007. During the first nine-month of the current financial year, the Bank has been able to sustain its growth momentum. The accelerated growth has taken the Bank nearer to its business targets for March 08

The highlights of the performance for the nine-month ended December 2007 are:

BUSINESS

• The Business of the Bank crossed Rs.1,10,000 crores mark to reach at Rs. 1,13,835 as against Rs.95,237 crores as at December-end 2006.

• Year-on-Year basis, the Business increased by 19.53%.

• During April-December 2007, the Business grew by 12.20%.

DEPOSITS

• Total Deposits of the Bank increased to Rs.68,044 crores as on 31.12.2007 from Rs.56,523 as on 31.12.2006. On YOY basis, it grew by 20.38%.

• Total Deposits grew by 14.28% during April-December 2007. Low-Cost Deposits of the Bank grew by 13.60% on Year-on-Year basis.

• As at Dec-end 2007, the market share of the Bank in Aggregate Deposits stood at 2.24%.

CREDIT

• Gross credit reached Rs.45,791 crores as on 31.12.07 from Rs.38,714 crores as on 31.12.2006. Year-on-Year basis the growth was 18.28%.

• During April-Dec.’07, Gross Credit grew by 9.25%.

• As at December-end 2007, Market share in Gross Credit was 2.09%.

PROFITABILITY

• Operating Profit was Rs.1109.54 crores during the April-Dec.’07 as against Rs.776.70 crores during April-Dec’06, registering a growth of 42.85%.

• Net Profit of the Bank increased from Rs.624.41 crores to Rs.805.23 crores during this period, showing a growth of 28.96%.

• Interest Income grew by 30.66% YOY basis for the nine-month period ending December 2007 over corresponding period last year.

• Cost of Deposits was 6.55% as at December 2007 as against 5.55% as at December-end 2006.Yield on Advances grew to 10.76% as at December-end 2007 up from 9.21% in December 2006. During this period, while Cost of Deposit was up by 100 basis points, yield on advances increased by 155 basis points.

• Non-Fund/Non-Interest Income (Commission & Exchange) grew @30.50% to Rs.295.47crores in December 2007 compared to Rs.226.41 crores in December 2006.

• Net Interest Margin (Spread to Average Working Funds) stood at 2.90% as on December-end 2007.

• Gross NPA to Gross Advances reduced to 2.06% as at Dec.-end 2007 from 3.06% as at Dec.-end 2006. It was 2.61% as at March-end 2007.

• Net NPA to Net Advances ratio reduced to 0.67% as at December-end 2007 from 1.07% as at March-end 2007 and 0.72% as on corresponding date last year.

• Provision Coverage Ratio was 65.16% as on 31.12.2007.

• Capital Adequacy Ratio stood at 12.84%. The Bank is comfortably placed for compliance of new Basel II norms by target date of 31.3.2008.

• Return on Assets (ROA) went up to 1.50% during April-Dec., 2007 compared to 1.42% during the same period last year.

• Operating Expenses to Average Working Fund reduced further from 1.69% at December-end, 2006 to 1.53% as at 31.12.2007 despite pressure of cost escalation.

• Establishment Cost to Total Expenses went down to 12.22% as at Dec.-end 2007 from 15.18% as at Dec.-end 2006.

• Earning per share (EPS) increased to Rs.24.03 from Rs.18.64 and Book Value increased to Rs.117.71 from Rs.95.37 during the same period.

• Gross Credit to Total Deposit Ratio was 67.30% as on 31.12.2007.

ANALYSIS OF Q3 RESULTS:

BRANCH EXPANSION

During the calendar year of 2007, 100 more branches have been opened throughout the country taking total number of branches from 2042 to 2142 of which rural are 983 (46%), semi-urban 402 (19%), urban 450 (21%) and metropolitan 307 (14%). The Bank has already in hand 116 authorizations for opening of new branches. Bank’s plan is to expand in areas where the Bank’s presence is not very much visible now and where business potentiality is good.

SOCIAL BANKING

• The Bank has adopted various strategies to improve its lending under Priority Sector Credit particularly in Agricultural and SME Sector. Priority Sector Credit grew from Rs.14,714.68 crores as on 31.12.2006 to Rs.17576.84 crores as on 31.12.2007 recording a year-on-year growth of 19.45%. The share of Priority Sector Credit to Adjusted Net Bank Credit stands above the stipulated norm of 40%.

• The outstanding agriculture credit increased from Rs.6643.97 crores as on December-end, 2006 to Rs.7905.84 crores as on December-end, 2007 registering a growth of 18.99% on year-on-year basis. The share of Agricultural Credit to Adjusted Net Bank Credit is maintained above the stipulated level of 18%.

• Credit to MSME sector went up to Rs.4354.36 crores as on December-end, 2007 from Rs. 3638.94 crores as on the corresponding date previous year showing a growth of 19.66% against the stipulated norm of 20% year-on-year basis.

• In tune with the national objectives, the Bank has put the following areas on special thrust under priority sector for the year 2007-08 – Financial Inclusion, Issuance of General Credit Card, Financing MSME sector, Food and Agro Processing, Godown/Cold storage, Plantation & Horticulture, Lending to Micro Finance Institutions etc.

Bank opens yet another Farmers’ & Entrepreneurs’ Training Institute at Paschim Medinipur (WB)

• Towards capacity building of Farmers, unemployed youth, women and those belonging to underprivileged section, the Bank established Allahahad Bank Farmers’ & Entrepreneurship Training Institute at Debra, Paschim Medinipur (WB). This is the second such Institute in the State first being Allahabad Bank Farmers’ & Entrepreneurs Training Institute at Bolpur and fourth Taining Institute in the country. This unique model supporting financial inclusion has been conceived by the Bank as an Integrated Model of Training, Credit & Infrastructure under one roof.

RISK MANAGEMENT INITIATIVES

• In tune with Final Guidelines of RBI on Implementation of New Capital Adequacy Framework (Basel-II), the Bank has initiated requisite steps to become Basel II compliant as on 31.3.2008.

• The Bank signed an MOU with four leading domestic Credit Rating Agencies namely CRISIL, CARE, FITCH and ICRA for affording credit rating to corporate and PSU borrowers.

• The Bank is updating / fine-tuning various systems and procedures, MIS technological capabilities, risk management structure etc for smooth transition to Basel-II environment.

• Bank is also in the process of creating awareness among the executives at various levels in regard to new capital adequacy norms (Basel II) in phased manner.

CUSTOMER SERVICE

• The Bank has geared up its entire machinery to bring about qualitative improvement in Customer Service.

• The Bank has constituted the Standing Committee on Customer Service in which 3 prominent personalities of public domain have been included for better interaction on various aspects of the customer service. At present , a retired High Court Judge, an Industrialist and a Chartered Accountant have been inducted as members of the Committee which had its first meeting recently.

NPA MANAGEMENT

The Bank has launched vigorous recovery drive including compromise settlement to reduce its NPA burden. The Bank also put in place the following initiatives for upgradation / settlement / write-off of non-performing borrowal accounts.

• Recovery Management Cell has been created at Lucknow for effective monitoring and follow up of both PNPA/NPA accounts. Similarly, one Dy. General Manager has been posted in Head Office to monitor all NPAs/PNPAs of the Zonal Offices in West Bengal.

• Personal visit /persuasion/issuance of demand notices and organization of Recovery Camps at regular intervals for cash recovery/settlement of NPAs.

• Activity specific OTS modules have been designed for effective recovery drive in NPA accounts.

• Taking recourse to SARFAESI Act, 2002. Ø The role and responsibility of Recovery branches have been reinforced.

• As a result of effective NPA management, the net and gross NPA ratios have been continuously declining . Gross NPA reduced to 2.06% as at Dec.-end 2007 from 3.06% as at Dec.-end 2006. It was 2.61% as at March-end 2007.Net NPA reduced to 0.67% as at December-end 2007 from 1.07% as at March-end 2007, and 0.72% as on same date last year.

RETAIL BANKING

Credit disbursement in Retail sector is one of the thrust areas of the Bank and the Bank has evolved several tailor made schemes to suit the need of the borrowers.

• The total outstanding amount under retail credit as on 31.12.2007 was Rs.7233 crores.

• The Bank has bouquet of Retail Credit Products to cater to the needs of all sections of the society.

• The Bank has 126 Retail Banking Boutiques (RBBs), which are solely focused on Retail Lending.

• Housing Finance to individual accounts stood at Rs.3024.86 crores as on 31.12.2007, registering a growth of about 6% over December 2006.

HUMAN RESOURCES DEVELOPMENT

The Bank has been emphasizing on continuous exposure of its work force to face the modern day banking challenges by putting them to intensive training programmes conducted at its 5 Training Colleges and one Institute for Research & Technology at Panchkula, Haryana. For competency development, they are also nominated to reputed and specialized training centres in India and abroad.

TECHNOLOGY NETWORK

• The Bank has joined the elite club of CBS banks and is steadily progressing bringing more and more branches under CBS platform. 153 branches have now rolled over in CBS platform.

• The remaining branches will be on Bank’s common software, source code of which has been procured from the vendor, but customized to our requirements at Bank’s Institute for Research and Technology, at Panchkula and the entire support for the software will be provided in-house.

• The Bank has connected 211 ATMs with 239 branches on its network. With membership of VISA and National Financial Switch, our card member can now access over 16500 ATMs all across the country.

• The Bank has computerized almost all its branches and extension counters.

• 126 branches are participating in Real Time Gross Settlement (RTGS) network.

• Bank has live NEFT facility in 106 branches and ECS facility in 64 centres.

• All Branches dealing in Government Business have been computerized.

FUTURE INITIATIVES

• After the first overseas branch at Hong Kong, the Bank is planning to expand further in other countries having economic potentiality.

• Aggressive marketing of retail products, cross-selling of insurance and mutual fund products with more thrust on income generation.

• Renewed thrust on prompt and courteous Customer Service and Grievance Redressal.

• Steadily bringing eligible branches under Core Banking Solutions (CBS) platform.

• The Bank plans to come out with Rs.300 crores perpetual Bond during the last quarter of the year after obtaining approval of the Board.

The Bank has improved its performance and established its visibility and strong presence in the market. The Bank is steadily moving at a faster pace to consolidate its position in the coming days introducing extensive computerization to ensure the state-of-the-art service comfort for its customers.

Date: 16th January, 2008.

Press Cornerer