IDFC Bank’s Asset Quality Improves After Loan Sales To ARCs
Provisioning for the bank declined 98 percent on a quarter-on-quarter basis.
IDFC Bank Ltd. saw a sharp improvement in its asset quality during the January-March quarter for the current financial year. During the quarter, the bank net sold 14 large corporate loans worth Rs 2,000 crore to asset reconstruction companies (ARCs), Chief Financial Officer Sunil Kakar said at a press briefing on Tuesday.
Gross non-performing assets during the January-March period declined 57 percent sequentially to Rs 1,542.1 crore as against Rs 3,586.7 crore during the previous quarter, the bank said in its stock exchange filing. In percentage terms, the asset quality improved to 2.99 percent for the fourth quarter compared to 7.03 percent during the October-December period.
Net NPAs too improved from 2.57 percent to 1.14 percent sequentially.
Consequently, provisioning for bad loans saw a decline of 98 percent on a quarter-on-quarter basis to Rs 4.79 crore compared with Rs 231.8 crore in the previous quarter. The bank had increased its provisioning by 937 percent in the third quarter.
The bank's net restructured accounts now stand at 1.3 percent of the total loan book, while its net security receipts rose to 3.3 percent, Kakar said.
Net profit for the quarter grew 6.57 percent on year to Rs 175.95 crore. Other income fell 59.1 percent as the bank decided to reduce some of its investment in treasury, said Rajiv Lall, the bank’s managing director and chief executive officer at the press briefing.
Net interest income grew 20.44 percent to Rs 502 crore compared to Rs 416.8 crore on a year-on-year basis. Net interest margins stood at 2.2 percent compared to 2.1 percent in the previous quarter. The bank’s margins are likely to remain under pressure in the current financial year, Lall said.
The Three-Year Road Map
IDFC Bank’s primary focus over the next three years will be to significantly ramp up its retail loan portfolio, which currently stands at around 25 percent of the loan book. Lall said the bank is aiming to double this share.
That, however, does not mean that IDFC Bank, which specialised in infrastructure loans in its previous avatar, will not look to grow its corporate loan book, Lall added. The bank will stay away from infrastructure loans, the share of which has fallen to around 54 percent of the book.
As part of its overarching goal of ramping up retail lending, the bank will look to increase its customer base to 10 million customers over the next three years from the current 1.4 million.
The growth will not be driven by a significant increase in brick-and-mortar presence. The bank aims to increase its branch network to 200 from the current 74, but will focus on increasing other points of presence. The bank will set up 1 lakh points of presence, including micro automated teller machines and Aadhar Pay outlets from the current 8,000 over the next three years, Lall said.