The Hindu Business Line : IDBI Bank Q1 net profit marginally up at Rs 160 cr

Mumbai, July 22 IDBI Bank posted almost flat growth in net profit for the quarter ended June 30, 2008, due to a fall in other income. Rising interest rates and bond yields resulted in lower treasury income. The bank posted a net profit of Rs 160 crore for the first quarter of this fiscal, up 4 per cent from Rs 153 crore in the corresponding quarter last year.

“We had to make provision on our treasury income due to the rising interest rates. This resulted in a fall in our other income,” said Mr R.K. Bansal, Chief Financial Officer, IDBI Bank.

The bank made a provision of Rs 51 crore for treasury losses on sale of government securities and corporate bonds. The bank also shifted about Rs 3,000 crore worth government securities held in AFS (Allowed for Sale) portfolio to HTM (Held to Maturity). Banks have to book losses on their AFS portfolio.

The equities portfolio also suffered a hit of about Rs 22 crore, but it is still positive, as the bank sold shares to cut losses, said Mr Bansal.

Other income also includes profits from investments of Rs 50.66 crore earned by the bank on buy back of its shares by IDBI Capital Market Services Ltd, a wholly owned subsidiary.

Deposits increased by 56 per cent and advances grew by 31 per cent.

The bank also saw its cost of funds going up to 8 per cent (7.75 per cent) due to rising interest rates. But the net interest margin went up marginally to 0.32 per cent (0.28 per cent).

“Interest expenses are up, but yields on advances are also higher. There is a time lag between when you can pass on higher interest rates to corporates and when you have to pay the interest on deposits,” Mr Bansal said.

The bank also saw deterioration in the quality of assets, with the proportion of Net NPAs to total assets increasing 1.36 per cent (1.15 per cent). The recovery from written off assets was Rs 27 crore (Rs 104 crore).

Growth target

For this fiscal, the bank has set a target of 35 per cent growth in deposits and 20-25per cent growth in advances, he added.

Going ahead the bank will focus more on retail advances, which currently forms about 20 per cent of total advances, Mr Bansal said.

On Tuesday, shares of IDBI Bank closed at Rs 70, on the BSE up 2.34 per cent against the previous close of Rs 68.4.

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