Race To The Bottom: IDBI’s Bad Loans Surge To Industry High
Gross NPA ratio at IDBI Bank surged to above 24 percent as of the June quarter.
IDBI Bank, seen as a likely candidate for bank privatisation, has reported yet another surge in bad loans in the April-June quarter. The lender now has the highest proportion of bad loans, with nearly a quarter of its book having turned bad.
For the first quarter of the current financial year, the bank reported a net loss of Rs 853 crore compared to a profit of Rs 241 crore in the year-ago period. In the fourth quarter of financial year 2016-17, the bank had reported a loss of Rs 3,200 crore.
While the reported loss was lower than the preceding quarter, bad loans continued to surge.
Gross non performing assets (NPAs) as a percentage of total loans surged to 24.1 percent. Net NPAs stood at 15.8 percent. In absolute terms, the bank saw gross bad loans jump to Rs 50,173 crore compared to Rs 44,752 crore in the previous quarter – an increase of 12 percent. Compared to the April-June quarter last year, bad loans at the bank have doubled.
Fresh slippages in the first quarter stood at Rs 8,364 crore. About 72 percent of the fresh slippages came from five large accounts, a senior official of the bank said on condition of anonymity.
IDBI Bank has an exposure of around Rs 19,000 crore in 11 out of the 12 accounts identified by the Reserve Bank of India (RBI) for immediate action under the Insolvency and Bankruptcy Code. The state-owned lender has an average provisioning of 37-40 percent against these accounts, the official said.
The bank’s recovery of bad loans improved to Rs 1,492 crore from Rs 778 crore in the same period, it said in an analyst presentation on its website. The bank has also written off Rs 825 crore worth of loans during the quarter.
A large portion, more than 80 percent, of the bank’s gross NPAs came from the micro, small, medium and large corporate loan book. Of this, infrastructure alone accounted for 21.64 percent, as on June 30.
During the quarter ended June, the bank set aside Rs 2,069 crore as provisions.
Deposits Moved Out Of Bank
IDBI Bank lost some ground on its deposit base sequentially, which shrank 9.5 percent to Rs 2,43,058 crore in the April-June quarter.
While high cost bulk deposit came down 18 percent quarter-on-quarter to Rs 79,025 crore, retail fixed deposits dropped 6 percent to Rs 82,197 crore. Low cost current account savings account (CASA) deposits fell 3 percent sequentially to Rs 81,837 crore.
Total advances fell nearly 2 percent quarter-on-quarter to Rs 1.87 lakh crore.
Capital Concerns Continue
The lender continued to report low capital adequacy levels and has breached some regulatory requirements. At the end of the June quarter, IDBI Bank had a capital adequacy ratio of 10.92 percent. In the notes accompanying the earnings release, the bank said that it received Rs 1,861 crore by way of capital infusion from the government on August 9.
Had this infusion towards share application been considered as on June 30, overall CRAR would have been 11.69 percent.IDBI Bank
The bank also disclosed that its capital conservation buffer is at 0.2 percent as against the regulatory requirement of 1.25 percent.
Earlier this month, the bank indicated that it would pay coupon on its additional tier-1 securities on time contrary to fears that it may need to skip payments due to its weak capital position. The bank received capital worth Rs 394 crore from the Life Insurance Corporation (LIC) of India in the quarter, by way of preferential allotment of equity shares.
“During Q1 FY18, the bank sold 2.5 percent stake in CCIL (Clearing Corporation of India Ltd) resulting in a capital gain of Rs 71 crore. Process for sale of balance 5 percent is already underway,” the bank said in its presentation, talking about its non-core asset sale.
IDBI Bank is in an advanced stage for the sale of its stake in SIDBI Ltd. and bids have been invited, it said. The sale is expected to materialise in the July-September period.