IDBI Bank Q4 net leaps 62% on robust interest, fee incomes

IDBI Bank is planning to raise about $250 million through an Asian Development Bank guaranteed overseas bond issuance.

The ADB guarantee will enable the bank to mop up resources through the seven year tenure bonds at a coupon rate which will be 30-50 basis points lower than what it would have paid without the guarantee, Mr R. M. Malla, Chairman and Managing Director, said while announcing the financial results.

At the current six-month London Inter-Bank Offered Rate of 0.44 per cent, the bank would be able to raise resources at 2.54 to 2.74 per cent.

“We will be signing a memorandum of understanding with ADB for providing a guarantee to our bonds. The potential global investors in the proposed bonds will include banks, financial institutions and provident funds,” said Mr Malla.

The public sector bank will also be looking to raise $1 billion this fiscal under its umbrella medium term note (MTN) programme. Last year, it had raised $350 million under the MTN programme.

Listing of CARE

IDBI Bank is planning to list Credit Analysis and Research Ltd (CARE). As per the credit rating agency's Web site, the three largest shareholders of the company are: IDBI Bank (26.75 per cent); Canara Bank (23.67 per cent); and State Bank of India (9.97 per cent). The balance 39.61 per cent stake is held, among others, by Federal Bank, IL&FS, and ING Vysya Bank.

“Like Crisil and ICRA we also want CARE to get listed. Listing will give the company more visibility and a valuation benchmark,” said a senior IDBI Bank official.

Financial Results

Backed by a robust increase in net interest income and fee income, the bank's net profit vaulted by 62 per cent to Rs 516 crore in the quarter ended March 31, 2011, against Rs 318 crore in the corresponding quarter last year.

In the financial year ended March 31, 2011, the bank reported a 60 per cent jump in net profit at Rs 1,650 crore (Rs 1,031 crore in FY2010).

In the reporting quarter, net interest income rose by 45 per cent to Rs 1,109 crore (Rs 762 crore in Q4FY2010) and fee income was up by 22 per cent to Rs 543 crore (Rs 444 crore).

“In FY2011, we deliberately pursued a bottomline-driven growth strategy. We grew current account, savings bank deposits to 21 per cent of total deposits, against 14.50 per cent last year. We resorted to cheap refinance to the tune of Rs 7,000 crore from various refinance institutions. On the advances side, we originated and sold loans in a big way,” said Mr Malla.