2QFY2013 Result Update | Banking

November 16, 2012

Andhra Bank
Performance Highlights

Particulars (` cr) NII Pre-prov. profit PAT 2QFY13 894 638 326 1QFY13 938 704 363 % chg (qoq) (4.8) (9.4) (10.3) 2QFY12 951 687 316 % chg (yoy) (6.0) (7.1) 3.0

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Banking 5,383 1.0 139/79 75,815 10 17,558 5,320 ADBK.BO ANDB@IN

`96 -

Source: Company, Angel Research

Andhra Bank posted a weak operating performance, with a 7.1% yoy decline in its operating profit. However, the bank was able to report a marginal net profit growth of 3.0%, aided by lower provisioning expenses (PCR declined by 723bp qoq). Slippages continued to remain elevated for the bank, which coupled with lower recoveries/upgrades, resulted in persistent asset quality stress. NIMs decline sequentially; Asset quality faces persistent stress: The bank witnessed a healthy growth in its business during 2QFY2013, with advances and deposits registering a growth of 15.9% and 15.0% yoy, respectively. The healthy advances growth was largely aided by strong growth in agri book and robust growth in SME and Corporate book. CASA deposits grew at 14.0% yoy. The CASA ratio declined by 78bp qoq to 25.9%. Reported NIMs were lower by 20bp qoq to 3.1% on account of an 8bp qoq decline in yield on advances and 29bp sequentially higher costs of deposits. The bank witnessed a robust growth of 37.6% yoy on the non-interest income (excluding treasury) front, which was largely aided by strong growth of 30.8% yoy in fee income and higher recoveries. On the asset quality front, the bank continued to see stress, with both gross and net NPA levels increasing sequentially by 27.8% and 41.6%, respectively. Slippages came in at `771cr, though lower compared to `833cr in 1QFY2013, but remained elevated considering slippages of `853cr in entire 2HFY2012. `530cr of the incremental slippages came out of 3 chunky accounts belonging to pharmaceuticals, hotels and gems & jewelry sector. The management however exuded confidence in upgrading two of these three accounts in the coming quarter. Recoveries/upgrades came in lower at `113cr compared to `142cr in 1QFY2013 and `551cr in 4QFY2012. PCR dipped by a substantial 723bp qoq to 53.2%. The bank also restructured advances worth `451cr, which largely came from infrastructure, iron & steel and textiles sectors. As of 2QFY2013, the total outstanding restructured book stands at `9,077cr (10.6% of total advances). The management has guided for advances worth ~`1,200cr to be in the restructuring pipeline for 2HFY2013, which includes an advance of ~`450cr to Tamil Nadu SEB. Outlook and valuation: At the CMP, the stock is trading at 0.7x FY2014E ABV compared to its eight-year range of 0.81.4x one-year forward ABV with a median of 1.1x. Considering the banks relatively higher risk exposure, particularly to the power, iron & steel and textiles sectors, and taking into account that peers of the bank are also trading at similar valuations with similar or better asset quality outlook, we remain Neutral on the stock. Key financials (standalone)
Y/E March (` cr) NII % chg Net profit % chg NIM (%) EPS (`) P/E (x) P/ABV (x) RoA (%) RoE (%)
Source: Company, Angel Research

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 58.0 15.2 13.4 13.5

Abs. (%) Sensex Andhra Bank

3m 6.9 (8.1)

1yr 2.5 (28.7)

3yr 17.0 13.8

FY2011 3,221 46.8 1,267 21.2 3.3 22.6 4.6 0.9 1.3 23.2

FY2012 3,759 16.7 1,345 6.1 3.3 24.0 4.3 0.8 1.1 19.2

FY2013E 3,805 1.2 1,204 (10.5) 2.9 21.5 4.8 0.8 0.9 15.2

FY2014E 4,415 16.0 1,220 1.3 3.0 21.8 4.8 0.7 0.8 13.8

Vaibhav Agrawal
022 3935 7800 Ext: 6808 vaibhav.agrawal@angelbroking.com

Sourabh Taparia
022 3935 7800 Ext: 6872 sourabh.taparia@angelbroking.com

Please refer to important disclosures at the end of this report

Andhra Bank | 2QFY2013 Result Update

Exhibit 1: 2QFY2013 performance (standalone)

Particulars (` cr) Interest earned - on Advances / Bills - on investments - on balance with RBI & others - on others Interest Expended Net Interest Income Other income Other income excl. treasury - CEB - Treasury Income - Recoveries from writ.-off acc - Others Operating income Operating expenses - Employee expenses - Other Opex Pre-provision Profit Provisions & Contingencies - Provisions for NPAs - Provisions for Investments - Other Provisions PBT Provision for Tax PAT Effective Tax Rate (%)
Source: Company, Angel Research

2QFY13 3,198 2,551 602 27 18 2,304 894 219 214 70 5 16 128 1,113 475 297 178 638 139 121 (14) 32 499 173 326 34.7

1QFY13 3,121 2,520 579 22 2,183 938 236 211 65 25 44 103 1,174 470 296 174 704 207 157 13 36 498 135 363 27.1

% chg (qoq) 2.5 1.2 4.0 23.7 5.6 (4.8) (6.9) 1.4 8.8 (78.4) (63.8) 24.8 (5.2) 1.1 0.4 2.3 (9.4) (32.5) (22.9) (9.8) 0.2 28.1 (10.3) 758bp

2QFY12 2,783 2,293 477 13 1,831 951 178 156 62 22 4 90 1,129 442 274 169 687 261 221 3 37 426 110 316 25.8

% chg (yoy) 14.9 11.3 26.3 113.6 25.8 (6.0) 23.4 37.6 14.2 (76.0) 288.3 42.2 (1.4) 7.4 8.5 5.6 (7.1) (46.5) (45.1) (12.2) 17.0 57.3 3.0 888bp

FY2012 6,320 5,071 1,181 49 18 4,487 1,832 455 425 135 30 60 231 2,287 945 593 352 1,342 346 279 (1) 68 996 308 688 30.9

FY2011 5,417 4,458 930 18 12 3,555 1,862 395 313 119 82 9 186 2,256 870 547 323 1,386 438 338 5 95 949 247 702 26.0

% chg 16.7 13.8 27.1 178.3 49.3 26.2 (1.6) 15.3 35.8 13.4 (63.3) 597.6 24.1 1.4 8.6 8.4 9.0 (3.2) (20.9) (17.6) (28.1) 5.0 24.7 (1.9) 488bp

Exhibit 2: 2QFY2013 Actual vs Angel estimates

Particulars (` cr) Net interest income Non-interest income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Company, Angel Research

Actual 894 219 1,113 475 638 139 499 173 326

Estimates 972 208 1,180 490 690 274 416 108 308

Var. (%) (8.0) 5.4 (5.6) (3.0) (7.5) (49.0) 19.7 59.8 5.7

November 16, 2012

Andhra Bank | 2QFY2013 Result Update

Exhibit 3: 2QFY2013 performance (standalone)

Particulars (` cr) Balance sheet Advances (` cr) Deposits (` cr) Credit-to-Deposit Ratio (%) Current deposits (` cr) Saving deposits (` cr) CASA deposits (` cr) CASA ratio (%) CAR (%) Tier 1 CAR (%) Profitability Ratios (%) Cost of deposits Yield on advances Yield on investments Yield on funds Cost of funds Reported NIM Cost-to-income ratio Asset quality Gross NPAs (` cr) Gross NPAs (%) Net NPAs (` cr) Net NPAs (%) Provision Coverage Ratio (%) Slippage ratio (%) Loan loss provision to avg assets (%)
Source: Company, Angel Research

2QFY13 1QFY13 % chg (qoq) 2QFY12 % chg (yoy) 85,299 78.5 5,937 22,219 28,156 25.9 12.4 8.5 8.0 12.0 8.0 10.0 7.2 3.1 42.7 3,014 3.5 1,831 2.2 53.2 3.7 0.4 86,612 80.4 6,269 22,485 28,754 26.7 12.7 8.7 7.7 12.1 7.9 10.0 7.0 3.3 40.0 2,358 2.7 1,293 1.5 60.4 4.0 0.5 (1.5) 0.9 (191)bp (5.3) (1.2) (2.1) (78)bp (29)bp (21)bp 29bp (8)bp 8bp 4bp 24bp (20)bp 267bp 27.8 76bp 41.6 64bp (723)bp (29)bp (12)bp 73,592 94,435 77.9 5,338 19,355 24,693 26.1 13.1 8.8 7.5 12.5 7.8 10.1 6.7 3.8 39.2 1,987 2.7 1,087 1.5 61.7 6.1 0.8 15.9 15.0 58bp 11.2 14.8 14.0 (23)bp (68)bp (30)bp 58bp (45)bp 26bp (10)bp 56bp (69)bp 351bp 51.7 81bp 68.5 68bp (854)bp (244)bp (42)bp

108,647 107,695

Business growth healthy; NIM declines by 20bp sequentially

The bank witnessed a healthy growth in its business during 2QFY2013, with advances and deposits registering a growth of 15.9% and 15.0% yoy, respectively. The healthy advances growth was largely aided by strong growth of 26.2% in agri book and robust growth of 16.7% and 15.2% yoy in the SME and Corporate book respectively. Growth in the retail loan book for the bank remained moderate at 6.0% yoy. On the liabilities front, savings deposits registered a healthy growth of 14.8% yoy, while growth in current deposits was moderate at 11.2% yoy. Consequently, overall CASA deposits grew at 14.0% yoy. The CASA ratio dipped by 23bp yoy and 78bp qoq to 25.9%. Reported NIMs for the bank dipped by 20bp qoq to 3.1% on account of 8bp qoq decline in yield on advances and 29bp sequentially higher cost of deposits. Yield on advances declined by 8bp qoq, on account of interest reversal of ~`60cr and base rate reduction. Cost of deposits was higher by 29bp qoq, partly on account of lower CASA ratio. Yield on investments for the bank grew by 8bp qoq to 8.0%.
November 16, 2012

Andhra Bank | 2QFY2013 Result Update

Exhibit 4: Business growth healthy

Adv. yoy chg (%) 25.0 20.0 15.0 10.0 5.0 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13
Source: Company, Angel Research

Exhibit 5: CASA ratio declines sequentially

CDR (%, RHS) 81.5 80.5 26.8 26.6 26.4 26.2 26.0 25.8 25.6 25.4 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3.4 4.4 12.1 CASA ratio CASA yoy growth (%, RHS) 13.6 14.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 -

Dep. yoy chg (%) 80.4 79.0

80.2

78.5

79.5 78.5

77.9

21.5 20.2

20.7 20.2

17.1 14.9

14.4 18.5

15.9 15.0

26.1

26.6

26.4

26.7

77.5 76.5

Source: Company, Angel Research

Exhibit 6: 29bp qoq higher Cost of deposits, led to...

(%) 8.50 8.00 7.50 7.00 6.50 6.00 5.50 5.00 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 7.45 7.59 7.94 8.03

Exhibit 7: ...20bp sequential fall in reported NIM

(%) 4.00 3.60 3.20 2.80 2.40 2.00 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3.82 3.81 3.34 3.33 3.13

7.74

Source: Company, Angel Research

Source: Company, Angel Research

Strong growth in fee income and higher recoveries, lead to robust growth in non-interest income
During 2QFY2013, the bank witnessed a robust growth of 37.6% yoy in noninterest income (excluding treasury), which was largely aided by strong growth of 30.8% yoy in fee income and higher recoveries. Growth in CEB income was moderate at 14.2% yoy, however a strong performance by forex and other income streams resulted in a strong growth of 30.8% yoy in the overall fee income. Recoveries came in higher during the quarter at `16cr compared to `4cr in 2QFY2012. The treasury income was lower at `5cr compared to `22cr in 2QFY2012 on account of a high base (investments in liquid MFs liquidated post the RBI limit of 10% of NW). Overall, the non-interest income witnessed a strong growth of 23.4% yoy, during 2QFY2013.

Elevated slippages coupled with lower recoveries/upgrades resulted in persistent asset quality stress
During 2QFY2013, the asset quality for the bank continued to see stress, with both gross and net NPA levels increasing sequentially by 27.8% and 41.6%, respectively. Consequently gross and net NPA ratios were higher by 76bp and 64bp qoq respectively to 3.5% and 2.2%. Slippages came in at `771cr, which

November 16, 2012

25.9

Andhra Bank | 2QFY2013 Result Update

though were lower compared to `833cr in 1QFY2013, but remained elevated considering slippages of `853cr in entire 2HFY2012. The annualized slippage ratio came in at 3.7% compared to 4.0% in 1QFY2013. `530cr of the incremental slippages came out of 3 chunky accounts belonging to pharmaceuticals, hotels and gems & jewelry sector. The management however exuded confidence in upgrading two of these three accounts in the coming quarter. Recoveries/upgrades came in lower during the quarter at `113cr compared to

`142cr in 1QFY2013 and `551cr in 4QFY2012. The management was not able to recover a chunky advance amounting to ~`200cr, which it had guided for. The PCR dipped on a sequential basis by a substantial 723bp to 53.2%. The management plans to increase the PCR level to 60% by FY2013.
During the quarter, the bank also restructured advances worth `451cr compared to restructuring of `751 in 1QFY2013, which largely came from infrastructure, iron & steel and textiles sectors. As of 2QFY2013, the banks total outstanding restructured book stands at `9,077cr (10.6% of total advances). The management has guided for advances worth ~`1,200cr to be in the restructuring pipeline for 2HFY2013, which includes an advance of ~`450cr to Tamil Nadu SEB.

Exhibit 8: Asset quality face persistent pressures

Gross NPAs (%) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 61.7 65.4 Net NPAs (%) 71.1 60.4 PCR (%, RHS) 75.0 53.2 60.0 45.0 30.0

Exhibit 9: Slippages remained at elevated levels

Slippages (%) 7.0 6.0 5.0 4.0 3.0 0.3 0.8 Credit cost (%, RHS) 1.0 0.8 0.5 0.4 0.6 0.4 0.2 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13

2.7 1.5

2.4 1.2

2.1 0.9

2.7 1.5

3.5 2.2

4.0

2QFY12 3QFY12 4QFY12 1QFY13 2QFY13

Source: Company, Angel Research

Source: Company, Angel Research; Note: PCR including tech. write-offs

Exhibit 10: Cost-to-income ratio higher in 2QFY2013

Cost-to-income ratio (%) 44.0 42.0 40.0 38.0 1.5 1.5 1.6 1.6 1.6 Opex to average assets (%, RHS) 1.7 1.6 1.6 1.5 1.5 1.4 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13
Source: Company, Angel Research

Exhibit 11: Employee expenses trend

Staff expenses (`cr) QoQ growth (% , RHS)

330 320 310 300 290 280 270 260 250 2QFY12 3QFY12 0.2 4.1

3.7
0.4 -

15.0

2.1

1.0

0.1

2.6

2.0

6.1

11.9

15.0 10.0 5.0

39.2

37.0

42.2

40.0

42.7

274

285

319

296

34.0

297

36.0

(7.2)

(5.0) (10.0)

4QFY12

1QFY13

2QFY13

Source: Company, Angel Research

November 16, 2012

Andhra Bank | 2QFY2013 Result Update

Investment concerns
Moderate fee income; low CASA
During FY200712, the fee income for the bank reported a CAGR of only 9.6% compared to advances posting a CAGR of 24.6%. In fact, the bank registered a negative growth in fee income during FY2012, which has led to the proportion of fee income to overall assets declining from 0.8% in FY2011 to 0.6% as of FY2012. On the CASA front, the banks market share has fallen by 26bp over FY2005FY2012; and at 25.9%, the banks CASA ratio is on the lower end compared to peers.

Risk-adjusted yields expected to fall

The bank has one of the highest yields in the industry (12.3% in 4QFY2012, 12.1% in 1QFY2013 and 12.0% in 2QFY2013 after accounting for interest reversals), also reflected in its relatively strong NIM of 3.1% (as of 2QFY2013). This can be partly attributed to the banks high concentration in the hinterland of its home state. That said, it is difficult for the bank to remain insulated from competition on the lending side and, as a result, we expect a decline in the banks risk-adjusted yields and overall profitability over the medium term. Also, in the current environment, the banks provisioning expenses are likely to increase at a faster rate, given the high yield on advances and relatively high exposure to riskier sectors.

Outlook and valuation

The banks asset quality, which until 1QFY2012 was significantly better than its peers, deteriorated substantially during 2QFY2012 on account of switchover to system based NPA recognition. Although higher recoveries in 2HFY2012 have led to reduction in gross NPA levels (compared to 1HFY2012), deterioration in asset quality was witnessed again in 1HFY2013, partly on account of chunky corporate slippages. The NPA ratios for the bank hence still remain significantly above the levels the bank used to enjoy pre-switchover to system based NPA recognition. Also, relatively high risk exposures, particularly to the power, iron and steel and textile sectors, create risk of higher deterioration in asset quality for the bank in the coming quarters in our view. At the CMP, the stock is trading at 0.7x FY2014E ABV compared to its eight-year range of 0.8x1.4x one-year forward ABV. Considering that the banks peers are also trading at comparable valuations with similar or better asset quality outlook, we remain Neutral on the stock.

November 16, 2012

Andhra Bank | 2QFY2013 Result Update

Exhibit 12: Key assumptions

Particulars (%) Credit growth Deposit growth CASA ratio NIMs Other income growth Growth in staff expenses Growth in other expenses Slippages Coverage Ratio
Source: Angel Research

Earlier estimates FY2013 12.0 13.0 25.5 3.1 7.6 12.0 15.0 2.8 65.0 FY2014 13.0 15.0 24.5 3.1 10.3 13.0 13.0 2.7 67.5

Revised estimates FY2013 12.0 13.0 25.5 2.9 7.7 8.0 15.0 3.8 55.0 FY2014 13.0 15.0 24.5 3.0 9.8 13.0 13.0 3.1 60.0

Exhibit 13: Change in estimates

FY2013 Particulars (` cr) NII Non-interest income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Angel Research

FY2014 Earlier estimates 4,612 1,021 5,633 2,306 3,327 1,366 1,961 588 1,373 Revised Var. (%) estimates 4,415 1,016 5,431 2,254 3,178 1,372 1,806 586 1,220 (4.3) (0.5) (3.6) (2.3) (4.5) 0.4 (7.9) (0.4) (11.1)

Earlier estimates 4,003 926 4,929 2,040 2,888 1,095 1,793 466 1,327

Revised Var. (%) estimates 3,805 926 4,731 1,994 2,736 1,017 1,720 516 1,204 (5.0) 0.0 (4.0) (2.3) (5.3) (7.2) (4.1) 10.7 (9.3)

Exhibit 14: P/ABV band

Price (`) 240 200 160 120 80 40 0
Dec-06 Apr-02 Jul-07 Aug-04 Apr-09 Mar-05 Aug-11 Mar-12 Oct-05 Feb-08 Nov-02 Sep-08 May-06 Nov-09 Oct-12 Jun-03 Jan-04 Jun-10 Jan-11

0.6x

0.8x

1x

1.2x

1.4x

Source: Company, Angel Research

November 16, 2012

Andhra Bank | 2QFY2013 Result Update

Exhibit 15: Recommendation summary

Company AxisBk FedBk HDFCBk ICICIBk* SIB YesBk AllBk AndhBk BOB BOI BOM CanBk CentBk CorpBk DenaBk IDBI# IndBk IOB J&KBk OBC PNB SBI* SynBk UcoBk UnionBk UtdBk VijBk Reco. Buy Accumulate Neutral Buy Accumulate Buy Accumulate Neutral Accumulate Accumulate Neutral Neutral Neutral Accumulate Accumulate Neutral Accumulate Neutral Neutral Accumulate Accumulate Buy Accumulate Neutral Accumulate Accumulate Neutral CMP (`) 1,226 459 642 1,027 23 416 137 104 736 274 54 428 75 396 108 103 174 75 1,320 317 743 2,108 119 72 222 67 54 Tgt. price (`) 1,476 491 1,270 25 492 152 817 294 445 123 195 347 843 2,437 131 250 74 Upside (%) 20.4 7.1 23.8 7.0 18.5 10.7 10.9 7.5 12.6 13.9 12.4 9.4 13.4 15.6 9.4 12.2 10.2 FY2013E P/ABV (x) 1.7 1.1 3.6 1.7 1.0 2.1 0.6 0.7 0.9 0.7 0.7 0.8 0.6 0.7 0.7 0.7 0.6 0.5 1.1 0.7 0.8 1.4 0.7 0.7 0.8 0.476 0.6 FY2013E Tgt. P/ABV (x) 2.0 1.2 2.0 1.1 2.5 0.7 1.0 0.8 0.7 0.8 0.7 0.8 0.9 1.6 0.8 0.9 0.525 FY2013E P/E (x) 8.9 8.9 17.8 12.4 6.0 9.8 4.1 4.8 5.4 4.3 4.5 5.3 3.5 4.0 4.5 4.7 4.1 3.8 6.8 4.9 4.5 8.2 4.4 4.3 4.8 3.1 4.8 FY11-12E EPS CAGR (%) 16.0 6.7 27.9 21.7 4.2 23.5 (5.6) (4.8) 6.4 16.9 38.9 4.0 102.4 (3.4) 2.5 17.5 2.8 23.0 7.9 29.0 6.8 21.5 11.5 7.9 20.3 18.4 12.1 FY2013E RoA (%) 1.6 1.1 1.9 1.5 0.9 1.5 0.8 0.8 1.0 0.8 0.7 0.8 0.6 0.7 0.8 0.9 1.1 0.6 1.3 0.9 1.0 1.0 0.7 0.6 0.8 0.7 0.5 FY2013E RoE (%) 20.2 13.3 22.0 15.7 16.9 23.5 14.5 13.8 17.0 15.8 16.1 14.6 14.9 14.7 15.6 13.9 16.3 13.1 17.7 14.4 17.3 17.7 16.6 14.4 16.4 15.7 13.0

Source: Company, Angel Research; Note: *Target multiples=SOTP Target Price/ABV (including subsidiaries); # without adjusting for SASF

Company Background
Andhra Bank is a mid-sized PSU bank, with a balance sheet size of ~`1.3lakh cr. The bank has a network of over 1,730 branches, mainly concentrated in the southern region (~two-third of total branches in the parent state of Andhra Pradesh).

November 16, 2012

Andhra Bank | 2QFY2013 Result Update

Income statement (standalone)

Y/E March (` cr) NII - YoY growth (%) Other income - YoY growth (%) Operating income - YoY growth (%) Operating expenses - YoY growth (%) Pre-prov. profit - YoY growth (%) Prov. & cont. - YoY growth (%) PBT - YoY growth (%) Prov. for taxation - as a % of PBT PAT - YoY growth (%) FY08 1,340 (5.5) 626 19.9 1,966 1.3 909 (2.6) 1,057 5.0 139 (37.2) 918 16.9 342 37.3 576 7.0 FY09 1,627 21.5 765 22.2 2,392 21.7 1,104 21.5 1,288 21.9 390 179.9 898 (2.1) 245 27.3 653 13.5 FY10 2,195 34.9 965 26.0 3,159 32.1 1,350 22.2 1,810 40.5 374 (4.1) 1,436 59.9 390 27.2 1,046 60.1 FY11 3,221 46.8 897 (7.0) 4,118 30.3 1,705 26.3 2,413 33.3 646 72.8 1,767 23.1 500 28.3 1,267 21.2 FY12E 3,759 16.7 860 (4.1) 4,619 12.2 1,804 5.8 2,815 16.7 991 53.4 1,824 3.2 479 26.3 1,345 6.1 FY13E 3,805 1.2 926 7.7 4,731 2.4 1,994 10.5 2,736 (2.8) 1,017 2.6 1,720 (5.7) 516 30.0 1,204 (10.5) FY14E 4,415 16.0 1,016 9.8 5,431 14.8 2,254 13.0 3,178 16.1 1,372 34.9 1,806 5.0 586 32.4 1,220 1.3

Balance sheet (standalone)

Y/E March (` cr) Share Capital Reserves & Surplus Deposits - Growth (%) Borrowings Tier 2 Capital Other Liab. & Prov. Total Liabilities Cash Balances Bank Balances Investments Advances - Growth (%) Fixed Assets Other Assets Total Assets - Growth (%) FY08 485 2,764 49,437 19.3 591 1,115 2,201 56,592 4,902 793 14,898 34,238 22.8 219 1,542 56,592 19.0 FY09 485 3,162 20.1 1,311 2,040 2,081 4,853 434 FY10 485 3,925 30.8 2,832 3,020 2,392 6,699 4,469 FY11 560 5,933 18.6 4,620 3,020 2,612 7,184 3,275 24,204 71,435 27.3 317 2,485 20.5 FY12E 560 6,920 14.9 5,221 3,020 3,393 5,564 3,082 29,629 83,642 17.1 303 2,745 14.8 FY13E 560 7,831 13.0 5,879 2,945 3,894 5,383 2,814 FY14E 560 8,758 15.0 6,729 2,871 4,598 5,502 3,221

59,390 77,688

92,156 105,851 119,612 137,554

68,469 90,342 108,901 124,964 140,720 161,070

16,911 20,881 44,139 56,114 28.9 335 1,796 21.0 27.1 356 1,825 31.9

35,422 42,584 93,679 105,857 12.0 330 3,092 12.6 13.0 367 3,539 14.5

68,469 90,342 108,901 124,964 140,720 161,070

November 16, 2012

Andhra Bank | 2QFY2013 Result Update

Ratio analysis (standalone)

Y/E March Profitability ratios (%) NIMs Cost to Income Ratio RoA RoE B/S ratios (%) CASA Ratio Credit/Deposit Ratio CAR - Tier I Asset Quality (%) Gross NPAs Net NPAs Slippages Loan Loss Prov. /Avg. Assets Provision Coverage Per Share Data (`) EPS ABVPS (75% cover.) DPS Valuation Ratios PER (x) P/ABVPS (x) Dividend Yield DuPont Analysis NII (-) Prov. Exp. Adj. NII Treasury Int. Sens. Inc. Other Inc. Op. Inc. Opex PBT Taxes RoA Leverage RoE 2.6 0.3 2.3 0.2 2.5 1.0 3.5 1.7 1.8 0.7 1.1 16.3 18.0 2.6 0.6 2.0 0.4 2.3 0.9 3.2 1.8 1.4 0.4 1.0 18.1 18.9 2.8 0.5 2.3 0.4 2.7 0.8 3.5 1.7 1.8 0.5 1.3 19.7 26.0 3.2 0.6 2.6 0.1 2.7 0.8 3.5 1.7 1.8 0.5 1.3 18.3 23.2 3.2 0.8 2.4 0.1 2.5 0.6 3.1 1.5 1.6 0.4 1.1 16.7 19.2 2.9 0.8 2.1 0.0 2.1 0.7 2.8 1.5 1.3 0.4 0.9 16.7 15.2 2.9 0.9 2.0 0.0 2.0 0.6 2.7 1.5 1.2 0.4 0.8 17.0 13.8 8.7 1.5 3.9 7.7 1.4 4.3 4.8 1.1 4.8 4.6 0.9 5.3 4.3 0.8 5.3 4.8 0.8 4.3 4.8 0.7 4.3 11.9 67.0 4.0 13.5 75.2 4.5 21.6 90.9 5.0 22.6 116.0 5.5 24.0 131.9 5.5 21.5 132.2 4.5 21.8 148.8 4.5 1.1 0.2 0.7 0.2 85.6 0.8 0.2 0.6 0.3 78.5 0.9 0.2 0.9 0.4 91.6 1.4 0.4 1.4 0.5 83.9 2.1 0.9 1.8 0.4 71.1 4.3 2.4 3.8 0.7 55.0 5.3 2.5 3.1 0.8 60.0 33.6 69.3 11.6 8.5 31.4 74.3 13.2 8.7 29.4 72.2 13.9 8.2 29.1 77.5 14.4 9.7 26.4 79.0 13.2 9.0 25.5 78.3 12.6 9.0 24.5 77.0 11.9 8.7 2.7 46.2 1.1 18.0 2.7 46.2 1.0 18.9 2.8 42.7 1.3 26.0 3.3 41.4 1.3 23.2 3.3 39.1 1.1 19.2 2.9 42.2 0.9 15.2 3.0 41.5 0.8 13.8 FY08 FY09 FY10 FY11 FY12E FY13E FY14E

November 16, 2012

10

Andhra Bank | 2QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Andhra Bank No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

November 16, 2012

11