1. Bad loans crisis: IDBI Bank Q4 loss rises to Rs 3,200 cr; NPA at highest-ever of 21.25%

Bad loans crisis: IDBI Bank Q4 loss rises to Rs 3,200 cr; NPA at highest-ever of 21.25%

IDBI Bank on Thursday reported a net loss of Rs 3,200 crore for the March 2017 quarter, wider than Rs 1,736 crore loss reported in the same period last year, owing to a manifold jump in provisions for bad assets.

By: | Mumbai | Published: May 19, 2017 6:46 AM
The bank also reported its highest ever gross non-performing asset (NPA) ratio at 21.25%.

IDBI Bank on Thursday reported a net loss of Rs 3,200 crore for the March 2017 quarter, wider than Rs 1,736 crore loss reported in the same period last year, owing to a manifold jump in provisions for bad assets. The bank also reported its highest ever gross non-performing asset (NPA) ratio at 21.25%. Provisions for NPAs stood at Rs 5,333 crore in the March quarter, 29 times more than what it had reported in Q4 FY16 and total provisions were up 40% year-on-year (y-o-y) to Rs 6,210 crore.

However, the bank was profitable on an operating level with pre-provisioning operating profit (PPOP) at Rs 1,390 crore, down 13% y-o-y. The bank’s net interest income (NII) — the difference between interest earned and interest expended — has risen 14.4% y-o-y to Rs 1,633 crore in Q4 FY17.

Its net interest margin (NIM) — a key measure of profitability — has increased by 8 basis points y-o-y to 1.75% in the same period. IDBI Bank also reported fresh slippages of `12,467 crore and wrote off Rs 1,170 crore loans in Q4FY17. According to the bank, 77% of its `44,753 crore gross NPAs are classified as doubtful assets or assets which have remained in the NPA category for a year and requires the bank to set aside at least 25% of the loan as provisions.

Its total advances fell 12% y-o-y to Rs 1.9 lakh crore and its total deposits was 1% higher on a y-o-y basis to Rs 2.68 lakh crore in the March quarter. IDBI Bank’s total capital adequacy ratio under Basel III norms stood at 10.7%, down from 11.67% in the March quarter of last year. Reacting to the results, shares of IDBI Bank on the Bombay Stock Exchange (BSE) fell as much as 8.96% to Rs 69.1 on Thursday and closed at Rs 70, down 7.77% from its previous close. The Reserve Bank of India (RBI) had recently initiated a prompt corrective action (PCA) for IDBI Bank. The action has been prompted by IDBI Bank’s high net NPAs and negative return on assets (RoA). In Q4 FY17, the bank’s net NPA ratio stood at 13.21% while the RoA stood at -1.39% in FY17.

IDBI Bank faces restrictions on distributing dividends and remitting profits. The owner, in this instance the government, may be asked to infuse capital into the lender. That apart, the lender would also be stopped from expanding its branch network. It would need to maintain higher provisions and management compensation and directors’ fees would be capped. Earlier in 2015, the central bank had initiated PCA against Indian Overseas Bank (IOB) and against United Bank of India in 2014. The RBI had barred UBI from taking an exposure of more than Rs 10 crore per client.

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