IDBI Bank Shares Close At 16-Year Low After Large June Quarter Loss
IDBI Bank has now reported losses for eleven consecutive quarters due to a large pile of non-performing assets.
Shares of IDBI Bank Ltd.—now majority owned by Life Insurance Corporation of India—fell to a 16-year low on Friday, after the bank reported a Rs 3,800 crore net loss for the April-June quarter due to higher provisions and a rise in bad loans.
The bank’s scrip fell more than 8 percent to close at Rs 24.80 per share on Friday, the lowest since May 22, 2003, when the stock closed at Rs 23.45 per share.
IDBI Bank has now reported losses for eleven consecutive quarters due to a large pile of non-performing assets. In the June 2019 quarter, the bank’s gross NPA ratio rose to 29.12 percent compared to 27.47 percent in the previous quarter. The bank’s net NPA ratio, however, fell to 8.02 percent compared to 10.11 percent in the previous quarter.
Net NPAs fell as IDBI Bank increased provisions against bad loans. The bank set aside Rs 7,009.5 crore in provisions, leading to a large quarterly loss.
The bank’s management, however, assured that the lender will return to profitability soon. “I maintain that we will be in profit by Q3 or Q4,” the bank’s Managing Director and Chief Executive Officer Rakesh Sharma told BloombergQuint.
Sharma said the bank had made additional provisions against a few large accounts.
In the April-June period, IDBI Bank downgraded two large power accounts to non-performing status, after the Reserve Bank of India asked it to do so. IDBI Bank made additional provisions worth Rs 1,200 crore for these two accounts during the quarter and now is fully provided against these loans, Sharma said. The bank’s total exposure to these accounts stood at over Rs 2,200 crore.
However, according to Sharma, this downgrade was only technical in nature and the bank is confident that they will upgraded later, leading to write back of the provisions made.
The bank’s operations have stabilised but a large chunk of the corporate portfolio is still under non-performing category, which is not giving any interest, Sharma said. He added that going forward, the bank expects strong recoveries from large accounts, as resolutions under the Insolvency and Bankruptcy Code materialise.