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Business News/ Companies / Company-results/  IDBI Bank posts quarterly net loss of `1,735 crore
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IDBI Bank posts quarterly net loss of `1,735 crore

IDBI Bank's total provisions for the quarter rose 19.5% to Rs4,450 crore due to recognition of stressed loans as NPAs on an RBI directive

The bank also had a tax writeback of Rs1,119 crore but for which the loss would have been steeper. Photo: Pradeep Gaur/ MintPremium
The bank also had a tax writeback of Rs1,119 crore but for which the loss would have been steeper. Photo: Pradeep Gaur/ Mint

Mumbai: State-owned IDBI Bank Ltd reported a net loss of 1,735.8 crore for the quarter to March after setting aside more money to cover the risk of loan default. The bank had reported a net profit of 546 crore a year ago, and a loss of 2,184 crore in the October-December period.

The bank also had a tax writeback of 1,119 crore but for which the loss would have been steeper. Total provisions rose to 4,450 crore, up 19.5% from 3,723 crore in the December quarter. Provisions a year ago were at 1,718 crore.

Provisions surged on recognition of stressed loans as non-performing assets (NPAs) on a directive by the Reserve Bank of India (RBI) after its asset quality review (AQR) in December.

The gross NPA ratio for January-March jumped to 10.98% of total loans, higher than 8.94% in the third quarter. Gross NPAs as an absolute number rose 26.8% to 24,875 crore from 19,615.22 crore in December.

In January-March, the bank reported slippages—new loans turning bad—worth 10,260 crore. “In this quarter, we have dealt with all assets which were listed by the AQR by RBI. As far as the bank is concerned, the storm has passed," said Kishor Kharat, managing director and chief executive officer.

Kharat said the bank is on track to implement a three-year plan aimed at cleaning up its balance sheet and doubling its business. “In a number of cases, we are expecting resolution to come through. Once that happens, the gross NPA number should come down drastically," he said, adding, “As per our three-year business plan, we are expecting to have about 17-18% business growth in 2016-17."

IDBI Bank’s net NPA ratio rose to 6.78% as of 31 March from 4.6% three months ago.

While nearly 19,000 crore worth of assets were classified under the special mention account (SMA)-2 category, only 4,519 crore worth of loans were risky, Kharat said. SMA-2 accounts are loans on which principal or interest is overdue for more than 60 days. “About eight accounts have repeatedly featured in the SMA-2 list, two among them are close to resolution, so about 2,100 crore worth of loans should move away from our watchlist," he said.

The provision coverage ratio (PCR) as of 31 March was at 57.24%, compared with more than 60% a year ago.

IDBI Bank’s capital adequacy ratio, a measure of financial strength expressed as a ratio of capital to risk-weighed assets, under the Basel III regime was 11.67% in the quarter ended 31 March, lower than 11.76% a year ago. The ratio was 13% in December.

“Fresh slippages are still on the higher side. Considering the net NPA number, the bank could have taken a higher provision to increase the PCR. But the operating profit and capital adequacy ratio would not have allowed it this quarter. We may expect this in the subsequent quarters," said Siddharth Purohit, banking analyst, Angel Broking.

Net interest income, or the difference between the interest earned on loans and that spent on deposits, rose by 6% from a year ago to 6,089 crore in the fourth quarter. Non-interest income, or the money earned in fees and commissions, fell to 1,346 crore from 1,970.3 crore last year, a dip of 32%.

Advances during the quarter rose by 3.6% year-on-year, to 2.15 trillion as of 31 March. Deposits grew 2.26% from a year ago to 2.65 trillion in the same period.

“We need about 6,000 crore worth of capital during this financial year. We already have shareholder approval to raise 3,771 crore through the QIP (qualified institutional placement) route. We can raise the rest either through internal accruals or sale of our non-core assets," Kharat said.

The bank aims to raise up to $1 billion through the sale of assets that aren’t central to its main business to support the growth in its core businesses, which is also part of its three-year business plan.

The bank had raised 450 crore through the sale of its stakes in non-core assets in the fiscal ended March. The bank has been able to monetize a part of its stake in the National Stock Exchange and CARE Ratings Ltd so far, Kharat said.

IDBI Bank conducted a preferential issue of shares in the last week of March and issued additional stock to Life Insurance Corporation of India, which now owns a 14.37% stake in the bank.

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Published: 20 May 2016, 04:36 PM IST
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