Money & Banking

IDBI Bank posts Q1 net profit of ₹144 crore

Our Bureau. Mumbai | Updated on July 28, 2020 Published on July 28, 2020

A view of IDBI bank in Secunderabad   -  THE HINDU

IDBI Bank reported a standalone net profit of ₹144 crore in the first quarter ended June 30, 2020, against a net loss of ₹3,801 crore in the year-ago quarter.

In the preceding quarter, the bank had reported a net profit of ₹135 crore.

The improvement in bottomline in the reporting quarter came on the back of healthy growth in net interest income and other incomeand write-back in loan loss provisions.

Based on its latest financial performance, IDBI Bank is expecting the Reserve Bank of India to lift the PCA-related curbs on it.

Barring the profitability criteria, the bank is compliant with the remaining three PCA criteria – capital, net non-performing assets (NNPAs) and leverage.

Net interest income (difference between interest earned and interest expended) was up 22 per cent year-on-year (y-o-y) at ₹1,773 crore (₹1,458 crore in the year-ago quarter).

Other income, comprising income from commission, fees, earnings from foreign exchange and derivative transactions, profit/ loss from sale of investments, and recoveries from written off accounts was up 21 per cent at ₹1,004 crore (₹833 crore).

Asset quality improves

The bank saw a sharp decline in fresh slippages to ₹69 crore in the reporting quarter against ₹727 crore in the preceding quarter and ₹3,486 crore in the year ago quarter.

Net NPAs declined to 3.55 per cent of net advances against 4.19 per cent in the March 2020 quarter.

Gross NPAs declined to 26.81 per cent of gross advances against 27.53 per cent in the March 2020 quarter.

During the quarter, it received a write-back of ₹1,335 crore in loan-loss provisions.

Credit cost turned negative due to reversal in NPA provision on account of recovery and upgradation. Bad debts written-off were higher at ₹1,101 crore (₹118 crore).

During quarter, the bank made Covid-related provision of ₹189 crore (cumulative provision of ₹436 crore since March 2020 quarter).

Further, it made additional provision of ₹114 crore over and above the IRAC norms in respect of two borrower accounts in view of the inherent risk and uncertainty of recovery in these identified accounts.

Overall, 51 to 52 per cent of the bank’s loan exposure (as on July 22) is under moratorium.

Rakesh Sharma, MD & CEO, explained that loans under moratorium is high because unlike many other banks, IDBI Bank gave “opt out” (of loan moratorium) option to its customers. So, those who did not exercise this option were considered as having taken moratorium.

However, the exposure under moratorium has come down from 66 per cent (in April) to 51 to 52 per cent as customers started repaying loans either partially or fully.

Referring to recoveries from bad loans being lower at ₹528 crore in the reporting quarter in view of the adverse impact of COVID-19 pandemic, Sharma said the bank has set a recovery target of more than ₹1,000 crore every quarter.

On net interest margin, which improved to 2.81 per cent from 2.13 per cent in June 2019, the IDBI Bank chief felt that it can be maintained at 2.75 per cent. However, the bank’s ultimate goal is to increase it to 3 per cent.

Sharma said the bank is eyeing an overall loan growth of 7 to 8 per cent in FY21. Within this, the target for structured retail assets growth target is 8 to 10 per cent; micro, small and medium enterprises (4 to 5 per cent); and corporate credit (5 to 6 per cent).

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Published on July 28, 2020
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