A. C. Mahajan in Calcutta on Wednesday. A Telegraph picture

Calcutta, Jan. 24: Allahabad Bank has reported a 27.57 per cent growth in net profit to Rs 286.13 crore for the third quarter ended December 31 on the back of a 31.64 per cent increase in total business during the same period.

“We have crossed our business target of Rs 95,000 crore for 2006-07 in the third quarter itself,” said A.C. Mahajan, chairman and managing director of Allahabad Bank. As on December 31, the bank’s total business stood at Rs 95237.45 crore. The bank’s interest income grew 38 per cent to Rs 1304.96 crore on December 31, 2006 from Rs 945.59 crore in the previous year.

The bank’s interest income from advances grew by nearly 61 per cent to Rs 899.52 crore during the quarter from Rs 560.11 crore in the year-ago period. “Our advances grew by almost 40 per cent during the quarter to Rs 38713.96 crore despite hikes in interest rate. It makes one believe that credit growth in the country has become interest rate neutral,” Mahajan said.

Deposits also grew by 26.65 per cent to Rs 56523.49 crore during the quarter. The bank’s credit-deposit ratio at the end of December stood at 69.15 per cent. While the bank has been able to increase its yield on advances to 9.87 per cent (from 8.83 per cent at the end of September) by raising lending rates, its cost of deposits has also went up to 5.73 per cent from 5.45 per cent.

The bank has also been able to reduce its establishment expenditure as a percentage of total expenses to 14.47 per cent from 20 per cent a year ago. “This is because our expenditure towards salary and so on haven’t increased at the same pace with business growth,” Mahajan explained. The bank has also reduced its operating expenditure as a percentage of average working fund to 1.61 per cent from 2.06 per cent a year ago.

By making a provisioning for Rs 30 crore during the nine months of the current financial year, Allahabad Bank has reduced its level of net non-performing assets to 0.72 per cent of net advances at the end of December. But its capital adequacy ratio stood at a healthy 12.80 per cent. “As of now, we are well capitalised for the next three years,” Mahajan said.

Allahabad Bank’s plan to form a joint venture with Punjab National Bank in Kazakhstan got a set back as the latter developed a cold feet to move forward. With the Punjab National Bank chairman and managing director retiring in August, the joint venture plan is likely to be shelved by both the banks.

The city-based bank is scouting for partners for an overseas joint venture. “We had approached Bank of Baroda for its Malaysia venture, but they wanted to go on their own. We are talking with other public sector banks for an overseas venture,” he added.