> Andhra bank (CITI)

3Q09 Results: Aggressive Loan Growth a Surprise

* 3Q09 profits up 34% YoY; core remains healthy but pace of growth a surprise
Andhra's bottom line grew 34% YoY and was slightly ahead of estimates
driven by a healthy core operating performance (pre-provision profits extrading
gains were up 16% YoY). NIMs remained strong, fee growth continued
and incremental slippages were reduced further. However, loan book grew at a
sharp 15% QoQ and raises incremental asset risk concerns.

* Margins recover from lows, fee grow remains healthy — Andhra's NIMs have
recovered smartly to over 330bps (from lows of 275bps in 1Q09) helped by a
reduction in wholesale deposit costs. Andhra's margins remained levered to an
easy liquidity environment due to its relatively high reliance on high cost
deposits and lower CASA ratio (32% now). Core fee income growth has
moderated a little though still healthy at 23% YoY.

* Pace of asset accretion is a surprise — Andhra Bank's loan book growth at an
aggressive 15% QoQ (34% YoY); and was the fastest QoQ accretion in its own
historical context. That it has come at a time of increasing economic duress
and led by a mid-market asset preference is surely a cause of concern.

To see full report: Andhra bank