Q4 Results: IDBI Bank Posts Loss For Tenth Straight Quarter
IDBI Bank reported a loss for the tenth straight quarter even as its asset quality improved.
IDBI Bank Ltd. reported a loss for the tenth straight quarter even as its asset quality improved. The lender, which has the worst asset quality among Indian banks, stepped up provisions against bad loans and said that it expects to exit the regulator’s corrective action framework by the second quarter of the current financial year.
Net loss of the Life Insurance Corporation of India-owned bank narrowed to Rs 4,918.4 crore for the quarter ended March from Rs 5,662 crore a year ago, according to its exchange filing. Net interest income jumped 75.8 percent year-on-year to Rs 1,609.3 crore.
Asset quality of the bank improved with the gross non-performing asset ratio falling to 27.47 percent from 29.67 percent in the December quarter. Net NPA ratio fell to 10.11 percent from 14.01 percent in the previous quarter.
While bad loans fell, the bank chose to step up provisions, which rose to Rs 7,233 crore from Rs 5,074 crore sequentially.
Higher-than-expected provisions impacted the bottomline, said Rakesh Sharma, managing director and chief executive officer at the press conference. The bank’s provision coverage ratio now stands at 83 percent, the highest in the industry, Sharma added.
The bank reported a divergence in bad loan reporting for 2017-18. The regulator detected an additional Rs 4,252 crore in bad loans, the bank said in an exchange filing.
Exit From Prompt Corrective Action
Last year, LIC picked up 51 percent stake in IDBI Bank. In December, LIC pumped in Rs 14,500 crore into the bank and another Rs 5,030 crore in January.
The funds have helped IDBI increase provisions and boost its capital adequacy ratio. The bank’s capital adequacy ratio stood at 11.58 percent as of March 2019, in line with regulatory norms on capital. That, together with a higher provision coverage ratio, should help IDBI Bank move closer to an exit from the RBI’s Prompt Corrective Action Framework .
Sharma expects IDBI Bank to return to profits by the second quarter of financial year 2019-20. The bank should be out of the Prompt Corrective Action framework after that since it will be compliant with the Reserve Bank of India regulations, he said.
The bank is also continuing to exit non-core businesses to generate more capital. It will sell its mutual fund and insurance businesses this year, said Sharma. In addition, it may also raise equity capital through a preferential allotment, rights issue or a qualified institutional placement.
The bank aim to raise Rs 6,500 crore capital this year through preferential allotment, rights issue or QIP.Rakesh Sharma, CEO, IDBI Bank
Operational Performance
Operationally, the bank’s performance remained muted.
Gross advances fell 10 percent over last year, as the bank continued to pull-back on the corporate loans, which fell 19 percent year-on-year. The bank had said that it will stop giving out corporate loans in order to reduce its risk weighted assets, in line with directions issued by the RBI under the corrective action framework.
Retail loans grew 5 percent over last year, which brought down the share of corporate loans to below 50 percent of the total book.
Total deposits fell 8 percent over last year but the share of current account savings account (CASA) deposits improved to 42 percent.
The bank’s net interest margin improved to 2.26 percent in the fourth quarter of FY19 compared to 1.19 percent a year ago.