IDBI Bank’s Q3 net loss widens on switch to new tax regime

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Published: February 12, 2020 2:00:29 AM

Shares of IDBI Bank ended at Rs 37 on the BSE on Tuesday, up 2.07% from their previous close. The results were declared after the close of trade.

Were it not for this reversal, IDBI would have posted a net profit of Rs 418 crore in Q3FY20.Were it not for this reversal, IDBI would have posted a net profit of Rs 418 crore in Q3FY20.

IDBI Bank on Tuesday posted a thirteenth consecutive quarter of losses for the December quarter, with its net loss widening to Rs 5,763 crore from Rs 4,186 crore a year ago as a result of the bank’s migration to a lower corporate tax regime. As a result of adopting the new tax regime, the bank had to reverse deferred tax assets (DTA), which resulted in a one-time hit of Rs 6,273 crore on its balance sheet. Were it not for this reversal, IDBI would have posted a net profit of Rs 418 crore in Q3FY20.

Rakesh Sharma, managing director and chief executive officer, IDBI Bank, said, “We have made accelerated provisions to the tune of Rs 1,679 crore and it is for the first time that the provisions have been made out of recoveries and not out of the capital base.” He added that Q3FY20 was the first time in 13 quarters that the bank turned in a profit on a pre-tax basis.

The private lender’s pre-provisioning operating profit rose 76% y-o-y to Rs 1,278 crore, led by a rise in net interest income (NII). NII, the difference between interest earned and interest expended, increased 13% y-o-y to Rs 1,532 crore. Net interest margin (NIM) stood at 2.27%, down six basis points sequentially.

The lender’s provisions fell 92% y-o-y to Rs 522 crore in Q3FY20. Asset quality showed an improvement as the gross non-performing asset (NPA) ratio improved to 28.72% in Q3FY20 against 29.43% in the previous quarter. Net NPA ratio improved to 5.25% in the December quarter, as compared to 5.97% in the September quarter. The provision coverage ratio (PCR) improved to 92.41% as on December 31, 2019 from 75.21% as on December 31, 2018.

Slippages amounted to Rs 2,113 crore, up from Rs 2,059 crore in Q2FY20. There were two large accounts worth an aggregate Rs 1,295 crore in the list of fresh bad loans, understood to be Dewan Housing Finance Corporation (DHFL) and Jain Irrigation. Recoveries and upgrades were to the tune of Rs 3,430 crore, up from Rs 1,759 crore in the September quarter.

The bank’s total deposits fell 5% y-o-y to Rs 2.18 lakh crore at the end of December 2019. The value of current account savings account (CASA) with the bank increased 18% y-o-y to Rs 1.04 lakh crore. The share of CASA in total deposits improved to 47.65% as on December 31, 2019 as against 38.36% as on December 31, 2018.

Gross advances fell 8% y-o-y to Rs 1.72 lakh crore in December 2019. Retail loans accounted for 55% of the total loan book, with the rest being comprising of corporate loans. Return on assets stood at -7.63% for Q3FY20, down from -4.54% in the previous quarter.

Shares of IDBI Bank ended at Rs 37 on the BSE on Tuesday, up 2.07% from their previous close. The results were declared after the close of trade.

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