The Directors of your Bank are glad to present the Annual Report of the
 Bank together with the audited Statement of Accounts and Auditors
 Report for the financial year ended March 31, 2011.
 
 1. PROFITABILITY:
 
 The sustained growth momentum of the previous years was continued and
 satisfactory performance was achieved during the financial year
 2010-11. With more efficient management of interest expenses and steps
 taken to augment interest income, the Bank could post higher Net Profit
 during the current year, despite reduction in Profit on Sale of
 investments by Rs. 184 Crore and additional establishment expenses of Rs.
 280 Crore on account of wage revision and extension of pension as
 second option and increase in the gratuity amounts due to the amendment
 to the Gratuity Act.
 
 Total Income increased by 25.23% from Rs. 7,337 crore to Rs. 9,188 Crore.
 while core non- interest income (excluding sale of Profit on
 Investments) registered a growth of 18.13 % and stood at Rs. 756 crore
 compared to Rs. 640 crore in the previous year. Operating Profit of the
 Bank increased to Rs. 2,413 crore from Rs. 1,810 crore, registering an
 increase of 33.33 %. Net Profit increased by 21.15 % toRs. 1,267.07 crore
 in 2010 - 11 from Rs. 1,045.85 crore in the previous year.
 
 Table 1: Highlights of Revenue, Expenditure and Profitability
 
                                                          (Rs. in crore)
 
                                2009-10   2010-11  Absolute  Percentage
                                                    Growth     Growth
 
 Total Interest Income          6372.87  8291.28   1918.41     30.10
 
 Total Interest expenditure     4178.13  5070.31    892.18     21.35
 
 Net interest Income            2194.74  3220.97   1026.23     46.76
 
 Other income                    964.62   896.96    -67.66     -7.01
 
 Profit on sale of investments   324.50   140.78   -183.72    -56.62
 
 Core other Income               640.12   756.18    116.06     18.13
 
 Operating expenses             1349.54  1704.86    355.32     26.33
 
 Operating profit               1809.82  2413.06    603.24     33.33
 
 Provisions and contingencies    763.97  1145.99    382.02     50.00
 
 Net Profit                     1045.85  1267.07    221.22     21.15
 
 1.1. The total interest income has shown a robust growth of 30.10% from
 Rs. 6,372.87 crore as on 31.3.2010 to Rs. 8,291.28 crore as on 31.3.2011.
 Of this, interest income from advances grew by 29.60% from Rs. 5,161.28
 crore as on 31.3.2010 to Rs. 6,689.17 crore as on 31.3.2011. Interest
 Income from investments increased by 29.56 % and stood at Rs. 1,539.59
 Crore for the financial year ended March, 2011.
 
 1.2.  The focus on credit expansion, high yielding advances in
 particular and the consequent increase in interest income from advances
 has contributed for the increase in Net Interest Income by 46.76 %.
 
 1.3.  Of the total non interest income, fee based income stood at Rs.
 96.19 Crore for the financial year ended March 2011 against Rs. 107.52
 Crore in the previous year.
 
 1.4.  Total expenses wereRs. 6,775.17 crore as on 31.3.2011 as against Rs.
 5,527.66 crore as on 31.3.2010. Of this, operating expenses stood at Rs.
 1,704.86 crore (an increase of 26.33 %). Establishment expenditure as a
 percentage of Total Expenditure stood at 16.30 % for the year ended
 31.3.2011.
 
 APPROPRIATIONS
 
 The appropriations made out of Net Profit are shown in Table 2. An
 amount of Rs. 316.92 crore was transferred to statutory reserves during
 2010-11, and with this, the statutory reserves now stand at Rs. 1,690.00
 crore. Transfer towards dividend (including dividend tax) amounted to Rs.
 357.70 crore.
 
 Table 2: Appropriations out of Net Profit
  
                                               (Rs. in crore)
 
                                                2010-11
 
 Appropriation out of Net Profit                1267.07
 
 Transfer to Statutory Reserves                  316.92
 
 Transfer to Capital Reserve                       4.40
 
 Transfer to Revenues Other Reserves             400.00
 
 Transfer to Special Reserve                      96.00
 
 Transfer to proposed dividend
 (including dividend tax)                        357.70
 
 Profit carried over to Balance sheet             92.05
 
 2. KEY FINANCIAL RATIOS
 
 2.1. The Bank has shown good improvement in key financial ratios. Net
 Interest Margin (NIM) improved to 3.80% compared to 3.21% in the
 previous year. Operating Profit improved to Rs. 2,413 Crore compared to Rs.
 1,810 crore in the previous year, with a growth of 33.33 %. The Cost to
 Income ratio improved to 41.40% from 42.72% in the previous year,
 reflecting enhanced operational efficiency. Buoyed by improved
 profitability, Earning Per Share (EPS) increased rom Rs. 21.56 to Rs. 26.05
 and Book Value Per Share (BVPS) increased from Rs. 90.93 to Rs. 116.02. The
 capital adequacy ratio rose to 14.38 %, following infusion of capital
 (including share premium amount) to the extent of Rs. 1,173 crore by
 Govt, of India, increase in Reserves & Surplus etc.,
 
 Gross Non-Performing Assets to Gross Advances stood at 1.38 %, and Net
 Non-Performing Assets to Net Advances stood at 0.38% as at the end of
 Mar11.
 
 Table 3-Key Financial Ratios
 
 Parameter                          31.3.2010     31.3.2011
 
 Yield on Advances (%)               10.92          11.16
 
 Cost of Deposits (%)                 6.10           5.90
 
 Net Interest Margin (%)              3.21           3.80
 
 Yield on Funds(%)                    8.49           8.93
 
 Cost of Funds(%)                     5.57           5.46
 
 Cost-to-income Ratio (%)            42.72          41.40
 
 CRAR (%)                            13.93          14.38
 
 Return on Assets (%)                 1.39           1.36
 
 Earning Per Share (Rs.)             21.56          26.05
 
 Book Value Per Shared)              90.93         116.02
 
 NetNPA(%)                            0.17           0.38
 
 Gross NPAs(%)                        0.86           1.38
 
 3. CAPITALS NET WORTH
 
 During the year 7.458 crore of equity shares were allotted
 preferentially to Govt, of India at a premium of Rs. 147.28 per share and
 with this the capital increased by Rs. 74.58 Cr and the Share Premium
 account increased by Rs. 1,098 Crore.  Due to Net Profit of Rs. 1,267 Crore
 earned and capital infusion of Rs. 1,173 crore, the capital and Net worth
 have improved substantially as detailed hereunder:
 
                                                   (Rs. in crore)
 
 Parameter                              31.3.2010     31.3.2011
 
 Equity capital                         485.00          559.58
 
 Reserves Surplus                      3925.04         5932.84
 
 Net worth of the Bank                 4410.04         6492.42
 
 4.0. CAPITAL ADEQUACY
 
 Consequent to issuance of 7.458 crore shares to GOI, the shareholding
 of GOI increased to 58%. This has helped the Bank to shore up its Tier
 I capital and have a higher CRAR to meet the requirements arising out
 of increased lending activity.
 
 The total capital funds as at the end of Mar11 stood at Rs. 9,861.04
 crore, up 30.95% from Rs. 7,530.27 crore in the previous year. The
 capital adequacy ratio stood at 14.38%, which is above the RBI
 prescribed norm of 9%.
 
 The higher Tier I capital ratio of 9.68% provides the Bank sufficient
 headroom for future business expansion. As per RBI guidelines, the Bank
 has already moved over to Basel II Capital Adequacy norms with effect
 from 31.03.2009 and computed CRAR for Credit risk, Operational risk and
 Market risks. However, as advised by RBI, the Bank continued to compute
 the CRAR as per Basel-1 norms also as a parallel run.
 
 Bank has also put in place Internal Capital Adequacy Assessment
 Process (ICAAP) for assessing the adequacy of capital levels keeping
 in view the expected increase in business levels and the additional
 capital requirement. The ICAAP is subjected to validation by Internal
 Auditors. The assessment process also includes a framework for
 inclusion of Pillar-ll risks under Basel-ll guidelines, such as credit
 concentration risk, interest rate risk in the banking book, liquidity
 risk etc.,
 
 Table 4: CRAR Position (%)
 
                              31 March 2010        31 March 2011
 
 Tier-1 capitalai                  8                   9.68
 
 Tier-II capital                  5.75                 4.70
 
 Total                           13.93                14.38
 
 5. DIVIDEND
 
 The Board of Directors of the Bank recommended a dividend of 55% for
 the financial year 2010-11, which is 5% higher than previous year.
 
 
 
 
 29.  DIRECTORS RESPONSIBILITY STATEMENT
 
 The Board of Directors hereby states that
 
 - The applicable accounting standards have been followed in the
 preparation of the annual accounts and proper explanations have been
 furnished, relating to material departures.
 
 - Accounting policies have been selected, and applied consistently and
 reasonably, and prudent judgments and estimates have been made so as to
 give a true and fair view of the state of affairs of the Bank and of
 the Profit & Loss of the Bank for the financial year ended 31st March
 2011.
 
 - Proper and sufficient care has been taken for the maintenance of
 adequate accounting records, in accordance with the provisions of the
 Companies (Amendment) Act, 2000, for safeguarding the assets of the
 Bank and for preventing and detecting fraud and other irregularities.
 
 - The annual accounts have been prepared on a going concern basis
 
 30. ACKNOWLEDGEMENT
 
 Andhra Bank is grateful to the Government of India, RBI, SEBI and other
 authorities/agencies, Financial Institutions and Correspondent Banks
 for their valuable support and guidance. The Directors also express
 their deep sense of appreciation to all the staff members of the Bank
 for their dedicated service, outstanding professionalism and commitment
 towards Banks vision for a sustainable growth.  Finally, the Directors
 wish to sincerely thank all the customers, shareholders and other
 stakeholders for their valuable support.
 
                                   For and on behalf of the Board,
 
 Place: Hyderabad,                                (R Ramachandran)
 
 Date: 05.05.2011                     Chairman & Managing Director