Expect 20% growth in advances ahead: Allahabad Bank

Allahabad Bank's net profit was up by 23% year-on-year to Rs 514 crore in the April-June quarter of 2012.

In an interview to CNBC-TV18, JP Dua, chairman and managing director of Allahabad Bank says, he expects 20% growth in advances ahead. "We have been achieving 20-22%," he adds. Below is the edited transcript of his interview on CNBC-TV18. Q: Could you first take us through the restructured assets? How much have been restructured? Was it largely state electricity boards? What did the restructured assets comprise of? A: Total restructured assets, which are done in this part, are Rs 4,770 crore. Out of that, Rs 3,100 crore comprises of electricity boards only, the major is UP Electricity Board with Rs 2,500 crore and then Dakshin Haryana and Ajmer. So, these are the major accounts that have been restructures during this quarter. Rest of the account comprises of one chemical account and one textile account of about Rs 300 crore each. Q: Will you have the satisfaction therefore that maybe in the current quarter, the July-September quarter, you are perhaps not going to have any big numbers? What is the restructuring pipeline looking like? A: We have some Rs 700-800 crore in the pipeline. One more thing about restructured accounts, the total number is Rs 10,474 crore, which is standard asset. Only Rs 253 crore is non-performing assets (NPA). So, as far as restructured assets are concerned, I am not worried because repayments will be coming regularly. If we go by pass track record of two-three years, never an account has been downgraded. So, this Rs 253 crore continues for the last two-three years. So, whatever fresh restructuring has been good account, they are standard accounts and hardly any net-present value (NPV) loss was there. We have provided only Rs 68 crore in this quarter being a reason for restructured asset. Q: The market is also betting on a possible increase in recoveries from here on. Do you think because monsoons have been week and that segment may not yield a lot of recoveries over the next couple of quarters, the pace of recoveries could slowdown, asset quality may not be as healthy as you would have envisaged before the onset of the monsoon? A: Let me share with you Q1 recovery numbers. Rs 120 crore is cash recovery, Rs 113 crore is up-gradation and Rs 169 crore is recovered out of technically written off assets. So, Rs 404 crore in this quarter against Rs 260 crore in Q1 last year. So, recoveries have been robust in the Q1. Most of the slippage has come from priority sector advances. So, I am very hopeful that there will be good recovery in the subsequent quarters. Q: The tax rate this time around has been much lower 20% versus 27%. Are you expecting a lower tax rate going forward? A: A lot of remissions are available because a lot of rural lending. Our rural lending is quite substantial. So, the tax rate may be less than what we have been paying. Infact our position is that we have paid higher taxes earlier and we have to recover about Rs 500 crore from the income tax department, which has been ruled in our favour. Q: Your net non-performing loans (NPLs) and your gross NPLs have come down, have you a goal what might you end the year with in terms of gross and net NPLs? As well if you counted restructured assets, what might be the total as a percentage of the total book? Advance growth has been less than 12%, will that be the average for the year? A: With regards to advances, our thrust is particularly more on asset quality than the numbers. Therefore, if you see the number in Q1, they appear to be less. Second, we are getting out of unsecured short-term loans. Total outstanding is now only Rs 2,000 crore. Third, with regards to the growth in advances, we have given a guidance of 20% growth. We have been achieving 20-22%. Having said that, our thrust will be on asset quality.