Andhra Bank sees pressure on NIM as deposit rates go up

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Hyderabad, Jan 31 (PTI) Public sector lender Andhra Bankmay see some pressure on Net Interest Margin (NIM) in thisquarter due to increase in the cost of funds as deposit ratesare going up, Chairman and Managing Director of the bank RRamachandran said here today.

According to him, the pressure could be in the range of10 to 20 basis points which will have some influence on theprofitability.

"I can say there will be some pressure on NIM in the lastquarter (of the fiscal). Pressure could be in the range of 10to 15 basis points. At the best it could go up to 20 basispoints. So correspondingly, there could be some pressure onprofits,� Ramachandran said.

However, he was quick to add that the bank would try toneutralise the effect by increasing recoveries through whichthere can be a reversal of provisions made.

"This could to some extent help make up for reduction inNIM and profits," Ramachandran told reporters after announcingthe Q3 results.

The bank reported a growth of 20.16 per cent in its netprofit at Rs 330.91 crore for the third quarter ended December31 on an income of Rs 2,320.20 crore.

NIM improved to 3.91 per cent for the quarter and 3.85per cent for nine months ended December 2010, as against 3.35per cent and 3.12 per cent respectively in the same periodlast year. .

The cost of deposit has slightly gone up to 5.84 per cent in the quarter as against 5.66 per cent a year ago.

The bank attributed the growth in net profit to lowdeposit rates a year ago and also efficient management ofresources.

It was also due to the robust growth in advances in thelast fiscal. That has reflected in the higher NIM showing asignificant operating profit and also net profit, the CMD ofthe bank explained.

Replying to a question on lending to MicrofinanceInstitutions, he said the bank has an outstanding of Rs 293crore from the MFI sector and all the loans are standardassets.

For further lending to the sector, the bank will take adecision after consulting other lenders.

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