Mumbai: Public sector lender IDBI Bank is hopeful of closing the fiscal with a net interest margin (NIM), the core profitability gauge, at over 2% on the back of a 41 basis points (bps) improvement in December quarter. The bank is also hoping to close the merger of Stock Holding Corporation of India Ltd (SHCIL) shortly as it is expecting the regulatory and government permissions soon.
“We hope to close the merger of Stock Holding Corporation with the bank very shortly. We have already appointed investment bankers for the deal also as we are awaiting regulatory nod,” IDBI Bank chairman and managing director R.M. Malla told PTI. This will jack up the customer base of the bank by many lakhs, as the corporation has 7 lakh demat account holders, he said.
On the NIM, Malla said, “We hope to close the fiscal with a NIM of over 2%, despite the 25 bps cut in base rate, as we have also reduced our deposit rates by a similar quantum. Also the 25 bps cut in the cash reserve ratio (CRR) will release Rs500 crore of our dud funds, which will result into Rs60 crore in interest income. Another positive is the overall improvement in the bad assets.”
The city-headquartered lender has one of the lowest NIMs in the industry as its assets are project and corporate finances. This is despite the fact that it has the lowest cost per employee as well as cost-to-income ratios amongst the state-run lenders. The bank registered a 41 bps improvement in the NIM in the December quarter at 2.30% from 1.89% in the year-ago period. However, the bank’s net profit was almost flat at Rs417 crore in the December quarter against Rs410 crore in the year-ago period.
On 1 November last year, IDBI had said its board approved the merger of Stock Holding Corporation of India, which is the country’s first and one of the largest security custodians to financial institutions, with itself.
As a custodian, SHCIL holds securities on behalf of banks, mutual funds, corporates, FIIs, venture capital funds and other institutional entities. IDBI owns 18.9% equity in SHCIL, with the other shareholders being IFCI (33%), GIC (14%) and SU-UTI and LIC with 17% each.
The merger will give IDBI Bank access to 227 branches and 7 lakh customers of SHCIL. IDBI’s interest lies in cross-selling opportunities to the 7 lakh SHCIL customers and converting the custodian’s offices into bank branches with the Reserve Bank of India’s approval.
Meanwhile, Malla also said IDBI touched Rs1.08 trillion in central tax collection as of 31 January and is hopeful of collecting around Rs40,000 crore more in the remaining period of the fiscal. At the end of 31 January, the bank surpassed the total tax collection of Rs1.20 lakh crore, including state taxes against Rs1.24 lakh crore collected in the entire previous year. IDBI has a strong focus on government business and has been engaged in collecting various direct and indirect taxes for the centre and various state governments.