IDBI Bank tops NPA list, posts Rs853 crore loss in Q1
Mumbai: IDBI Bank Ltd reported a net loss of Rs853.01 crore for the three months ended June compared with a profit of Rs241.10 crore a year ago as bad loans ballooned to a record high.
With gross bad loans rising to 24.11% of gross assets, IDBI Bank has the unwanted record of being the lender with the highest bad loan ratio, replacing Indian Overseas Bank (IOB). Chennai-based IOB has a gross NPA ratio of 23.6%.
Despite the losses, IDBI Bank’s capital position improved as its loan book shrunk, and the bank received capital infusions from the government and the Life Insurance Corporation of India through a preferential allotment of equity shares.
Capital adequacy ratio improved to 10.92% from 10.70% in the March quarter, though it was lower than the previous year’s figure of 11.80%. The bank received Rs394 crore from LIC and Rs1,861 crore from the government.
The bank, which is under the Reserve Bank of India’s (RBI) so-called prompt corrective action (PCA), reported an 84% year-on-year surge in gross bad loans to Rs50,173 crore. On a sequential basis, gross bad loans jumped 12%.
PCA mandate banks to increase recoveries of bad loans, reduce risky loans, strengthen their capital base and restrict branch expansion, among other measures, to improve their balance sheet.
Fresh additions to bad loans totalled Rs7,659 crore in the first quarter. Of this, around 72% are from five large corporate borrowers, which were also part of the bank’s watch list of stressed loans.
IDBI’s chairman and managing director M.K. Jain said in an analyst conference call that the bank has exposure to 11 of the 12 accounts that have been identified by RBI for early insolvency proceedings. Against the total exposure of Rs19,000 crore, the bank has around 40% aggregate cover in the form of provisions.
Following IDBI’s results, the total gross NPAs of the 38 listed banks in India rose to Rs8.29 trillion from Rs6.54 trillion a year ago.
RBI’s asset quality review in late 2015, where all lenders were directed to recognize stressed loans and set aside adequate provision, impacted the profitability of many banks, including IDBI Bank. In its case, the problem compounded after the January arrest of its former chairman Yogesh Aggarwal and other officials by the Central Bureau of Investigation over a loan granted to the now defunct Kingfisher Airlines Ltd.
The lender’s fiscal first-quarter loss would have been worse but for a tax write-back of Rs339.61 crore. IDBI Bank’s provisions and contingencies fell 15% to Rs2,069.70 crore from Rs2,432.24 crore last year. The provision coverage ratio, a cover of stressed loans, was at 52.42%.
The bank has stepped up efforts to raise capital through the sale of non-core assets and remains focused on restricting corporate loans, increasing retail advances, reducing operational costs, containing fresh slippages and increasing loan recoveries as part of its comprehensive turnaround strategy, Jain said.
In June, the bank had said it is aiming to garner around Rs5,000 crore in this financial year through sale of non-core assets.
“The asset quality pain is seen continuing for next 12-18 months and we expect slippages to be around 3% of the current outstanding loans of the banking sector in that period. Provisioning requirement would remain elevated for the sector, keeping pressure of profitability. We expect (a) few mid-sized public sector banks to continue to post losses in FY18,” said Udit Kariwala, senior analyst, financial institutions, India Ratings and Research.