Doubtful infra loans push IDBI Bank into deep red

MUMBAI: Infrastructure loans continue to hit the profitability of the government-owned IDBI Bank. The bank reported a net loss of Rs 1,735.8 crore for the quarter ended March 31, 2016 as it was forced to set aside nearly 159% higher provisions of nearly Rs 4,450 crore for its bad loans, majority of which are loans given to power, cement and steel companies.

If it was not for a tax write-back of Rs 1,119 crore, the loss would have been higher than the preceding quarter, when it posted a loss of Rs 2,184 crore. The bank reported a net profit of Rs 546 crore a year ago.

Asset quality worsened during the quarter with the economic environment showing very feeble signs of improvement. In absolute terms, gross NPAs jumped 96% to Rs 24,875 crore from the year ago period, impacted by a Rs 1,0260 crore fresh slippage in the fourth quarter ended March 31, 2016.

IDBI hopes to raise as much as $1 billion during the current financial year by selling non-core assets to fund its growth.

Kishore Kharat, managing director and chief executive officer, IDBI Bank, said, “We are fully completed the asset quality review provisioning requirements. Now at least we can say that the storm has gone and we hope to start on a stronger balance sheet.”

Net interest margin was down marginally at 1.88% as the bank revised its base rate.

On Friday, the IDBI stock closed 0.47% lower at Rs 64.10 on the Bombay Stock Exchange (BSE).

It has tax write-back of Rs 1,119 crore for the quarter against tax expenses of Rs 225 crore in the year-ago period. It also got over Rs 300 crore from the sale of non-core assets during the year.

BK Batra, deputy managing director, IDBI Bank, said, “Given the economic environment, we have kept up a reasonable performance. We have brought down our high-cost bulk deposits and increased our retail deposits, resulting in lower funding cost.”

Total income also decreased to Rs 8,274.58 crore during the quarter, as against Rs 9,382.37 crore in the year-ago period. For the full fiscal 2015-16, the bank registered a net loss of Rs 3,664.80 crore as against a net profit of Rs 873.39 crore in 2014-15.

The bank has a capital requirement of Rs 6,000 crore for FY17.

“We will raise Rs 2,923 crore via QIP this year when market conditions are favourable and can raise up to $1 billion through sale of non-core assets,” Kharat said, adding that the bank has identified non-core assets worth Rs 6,000 crore for sale.