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IDBI Q1 loss widens on poor asset quality

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Mumbai: IDBI Bank’s losses widened to Rs 3,801 crore in the June quarter from Rs 2,409 during the same quarter last year on higher provisions made for bad loans as the lender’s asset quality deteriorated further. The troubled lender has lost over half its market value from the time Life Insurance Corporation (LIC) invested Rs 21,600 crore to increase its stake to 51 per cent from the earlier 14.5 per cent. IDBI’s shares closed at Rs 27 on Wednesday as against Rs 56 on January 21 when LIC became the majority shareholder. Gross non-performing assets (NPA) stood at 29 per cent of total advances in the June quarter, up from 27 per cent in the April quarter. Slippages for the quarter stood at Rs 3,846 crore, largely due to two power accounts worth Rs 2,226 crore turning into NPAs. Provisions for bad loans doubled to Rs 7,009 crore as against Rs 4,602 crore last year even as the bank received Rs 1,508 crore of tax write-back in the reporting quarter. “Three years ago, almost 80 per cent of our loans were to corporate sector, and specifically to power and infrastructure companies.

The ill health of these sector in recent times have contributed significantly to the elevated NPA levels,” said Rakesh Sharma, CEO, IDBI Bank. The bank’s net NPA dropped to 8 per cent from last year’s 18.7 per cent which according to Sharma would be brought down to below 6 per cent by September.

The bank also expects to return to black by December quarter on the back of recoveries from stressed assets and yields from retail loan growth. IDBI is the only private sector lender of the six underReserve Bank of India’s prompt corrective action (PCA) list. “Since we are under lending curbs, we are solely focusing on growing our retail book where our asset quality is much better.

This has reflected in our declining net NPAs as well,” Sharma said. However, the liquidity buffer, a key criterion to exit PCA remained a point of concern.

Common equity tier 1 (CET 1) ratio stood at 6 per cent, much below the 9 per cent mandated by the RBI. Sharma said that the bank would raise Rs 10,500 crore through both preferential share sale and sale of non-core assets over the course of the fiscal.

The bank is currently in the process of divesting its holdings in IDBI Federal Life Insurance where it is a promoter.

“We have initiated the process and are looking at prospective buyers and a deal should be stuck by the end of the year,” said Sharma.




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