Money & Banking

IDFC First Bank reports net loss of ₹630 crore in Q1 on higher provisions

Our Bureau Mumbai | Updated on July 31, 2021

Net interest margin was 5.51 per cent as cost of funds reduced further

Private sector lender IDFC First Bank reported a standalone net loss of ₹630.04 crore in the first quarter of the fiscal year due to a sharp rise in provisions.

The bank had reported a standalone net profit of ₹93.54 crore in the quarter ended June 30, 2020.

Total income grew by 11.4 per cent to ₹4,938.05 crore in the first quarter of the fiscal from ₹4,434.12 crore a year ago.

The bank’s net interest income grew by a robust 25 per cent to ₹2,185 crore in the quarter ended June 30, 2021 as against ₹1,744 crore a year ago.

Net interest margin was 5.51 per cent as on June 30, 2021 versus 4.86 per cent a year ago and 5.09 per cent in the fourth quarter of 2020-21. In a statement on Saturday, the bank said this was because the cost of funds further reduced.

Other income surged by 75.1 per cent to ₹848.76 crore from ₹484.85 crore a year ago.

Additional Covid-19 provisions

Provisions shot up by 145.9 per cent to ₹1,878.61 crore in the first quarter of the fiscal as against ₹764.08 crore in the corresponding period a year ago.

“The bank has created additional Covid-19 provisions of ₹350 crore during the quarter taking the total Covid-19 provision pool to ₹725 crore. The bank believes that the full estimated impact of second wave of Covid is now provided for in the books of the bank,” it said.

Noting that there was no moratorium provided to customers during the second wave of the pandemic, it said that there was ageing provisions that were required to be taken as per its conservative provisioning norms.

“The bank believes that these provisions may not reflect actual economic loss but represent a delay in timing of repayments,” it further said.

Based on the recent portfolio quality indicators (latest cheque bounce trends, collection efficiency, vintage analysis), the bank said it expects the provisions to taper off for the rest of the year if there is no third wave of the pandemic.

“Regarding the loss during the quarter, we have made prudent provisions for Covid second wave, and expect provisions to reduce for the rest of the three quarters in the fiscal. We guide for achieving pre - Covid level gross and net NPA, with targeted credit loss of only two per cent on our retail book by the fourth quarter of 2021-22 and onwards, assuming no further lockdowns,” said V Vaidyanathan, Managing Director and CEO, IDFC First Bank.

The bank’s asset quality deteriorated. Gross non performing assets shot up to ₹4,667.12 crore or 4.61 per cent of gross advances as on June 30, 2021 from 4.15 per cent as on March 31, 2021 and 1.99 per cent a year ago.

Net NPAs also rose to 2.32 per cent of net advances from 0.51 per cent as on June 30, 2020.

Standard restructured outstanding portfolio (under the Covid-19 relief package provided by the RBI) in retail loans was 1.81 per cent of the overall retail loan book as of June 30, 2021. Restructuring for the overall portfolio stood at 2.01 per cent of the total funded assets.

Published on July 31, 2021

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