K.K. Agarwal in Calcutta on Friday. A Telegraph picture

Calcutta, July 18: Allahabad Bank today reported a sharp decline of 53.41 per cent in net profit for the first three months of the current financial year at Rs 93.36 crore compared with Rs 200.40 crore in the same period a year ago.

“The lower profit is because of a huge provisioning of Rs 264.08 crore that the bank had to make for mark-to-market depreciation in investments,” said K.K. Agarwal, executive director of Allahabad Bank.

According to Agarwal, the market value of the bank’s investments in government securities declined sharply because of a steep increase in the yield on government bonds (prices of bonds are inversely related to their yields) in the face of rising interest rates.

“Besides, last year we enjoyed a write back of Rs 34.60-crore to our net profit account. This makes the decline in net profit this year look much larger compared with last year,” Agarwal said.

The bank’s total investment at the end of June stands at Rs 24,974 crore, of which Rs 14,600 crore of investments is held for maturity and another Rs 10,365 crore is available for sale. “The remaining Rs 9 crore is held for trading,” Agarwal said.

However, the bank has been able to maintain its net interest margin in the reporting period at 2.75 per cent, almost at the same level as in the previous corresponding quarter.

The total business of the bank grew 19.42 per cent to Rs 1,23,451 crore at the end of June this year. Total deposits rose 16.54 per cent to Rs 73,207 crore, while gross advances increased 23.88 per cent to Rs 50,244 crore.