Allahabad Bank CMD .N. Singh (left) in Calcutta on Sunday. Picture by Kishor Roy Chowdhury

Calcutta, May 14: Allahabad Bank has reported a 30.33 per cent rise in net profit at Rs 706.13 crore for the year ended March 31, 2006, against Rs 541.80 crore in the previous year. Its business grew 24.87 per cent to Rs 78,561 crore. The bank has recommended a 40 per cent dividend, up from 30 per cent in 2004-05.

The board of directors met in the city today to approve the financial results. At the meeting, external auditors had sought clarifications on a number of issues, according to officials.

“Yes, they (external auditors) raised a number of questions and gave some suggestions too,” said T.K. Ghose of TK Ghose & Co, one of the four external auditors. However, he declined to give further details.

“Everything is fine. We sought clarifications about certain definitions and accounting procedures that the bank has followed. These are usual in such an audit process,” said an official of an audit firm.

Allahabad Bank reported a higher profitability last fiscal when almost all banks faced pressure on earnings.

The banks were under pressure due to a higher provisioning for investment depreciation in government securities and treasury operations in the face of one percentage point rise in the interest rate between September 2005 and March this year.

The bank also provided for Rs 193-crore depreciation and amortisation and Rs 75 crore for non-performing assets, which now stands at 0.84 per cent on net basis.

“However, the bank was able to reduce its cost of borrowing and increase the yield on advances. In conjunction with this, a better asset and investment management helped us increase our profitability,” Singh said.

However, the bank’s operating profit grew only by 9.68 per cent to Rs 1,024.15 crore in 2005-06, largely due to losses from treasury operations. Excluding treasury losses, the bank’s operating profit registered a growth of 50.97 per cent.

Its reserves also stood healthy at Rs 3,191 crore, while the capital adequacy ratio was at 13.37 per cent. “We have an investment fluctuation reserve of Rs 436 crore, which we may use as tier I capital if needed,” Singh said.

The bank will kick off its general insurance joint venture in October. “We and our other partners in the insurance venture have chosen Sampo of Japan as the foreign partner. The shareholders’ agreement is being prepared and we are waiting for the IRDA approval,” Singh said.

Allahabad Bank will open branches in China and Hong Kong in June, and start a joint venture with Punjab National Bank in Kazakhstan, he added.