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  1. IDBI Bank posts first-ever loss on steep rise in provisioning

IDBI Bank posts first-ever loss on steep rise in provisioning

A four-fold increase in provisions resulted in IDBI Bank slipping into the red for the first time ever, as the bank reported a net loss of Rs 2,183.68 crore for the December quarter, against a net profit of Rs 102.79 crore in the same quarter last year.

By: | Mumbai | Published: February 13, 2016 12:30 AM

A four-fold increase in provisions resulted in IDBI Bank slipping into the red for the first time ever, as the bank reported a net loss of Rs 2,183.68 crore for the December quarter, against a net profit of Rs 102.79 crore in the same quarter last year.

The spike in provisions came as a result of the Reserve Bank of India’s asset quality review, in which the regulator identified numerous accounts and asked banks to reclassify them in the last two quarters of the current fiscal.

The state-owned bank reported a rise of 300 basis points in its gross non-performing assets (NPA) as a percentage of total loans to 8.94%. Net NPA ratio rose 144 basis points to 4.60%.

The bank’s provisions for the quarter under review came in at Rs 3,722.67 crore, nearly four times higher on a year-on-year basis. According to Kishor Kharat, managing director and chief executive officer, R1,200 crore of the total provisions were towards standard assets which may or may not slip into the non-performing category in future.

IDBI’s fresh slippages — incremental bad loans — for the quarter stood at Rs 5,839 crore, more than half of the bank’s current market capitalization. As on December 31, 2015, the bank had stressed loans — sum of restructured accounts and non-performing assets — worth Rs 33,000 crore on its books.

Speaking about the origin of these bad loans, BK Batra, deputy managing director, said most of these accounts came into being during the end of the previous government’s tenure, primarily because of the then-prevalent “policy logjam”.

He also said the bank might report similar NPA numbers for the March quarter too, since the RBI has given a deadline of March 31, 2016 for reclassifying all stressed accounts on its list. IDBI Bank’s total income for the quarter under review fell 7.2% year-on-year to Rs 7361.86 crore. However, cost optimisation helped the bank improve its net interest income by 8.7% y-o-y to Rs 1,555.54 crore. Net interest margin improved 13 basis points to 1.98%.

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