Allahabad Bank reported a more than expected 23% net profit growth due to a Rs 120-crore cash recovery.
This happened as the bank's net interest margin fell by 23 basis points and asset quality deteriorated.
Its NIM for the quarter was 3.17% amid intense pressure on cost of deposits while the NIM was 3.40% for the June quarter in 2011.
The bank wants to maintain the margin above 3% with a focus on retail and SME loans that yield more than large corporate loans.
"We don't want to lend at higher rates and create bad loans," bank chairman and managing director JP Dua said although asset quality dipped despite restructuring of Rs 4,770-crore worth of loans. A banking analyst said the stress on Allahabad Bank's asset quality may re-emerge as the different sectors are facing strain.
The bank grew its loan book by a modest 12% during the first quarter as the slowing economy has shrunk lending opportunity. Dua said expects things to improve hereon and the bank targets to grow advances by 20-21% for the fiscal.
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