IDFC Bank sees bad loans rising, no impact on earnings

MUMBAI (Reuters) - IDFC Bank Ltd, one of India's two newest banks, expects its gross bad loans to increase in the coming quarters although that will not hit earnings as it has made adequate provisions, it said on Wednesday.

IDFC Bank, a unit of infrastructure lender IDFC Ltd, started operations last October after receiving a permit from the Reserve Bank of India in what was the first bank licensing process in a decade.

It reported on Wednesday a net profit of 2.42 billion Indian rupees ($36 million) for the December quarter, its first full-quarter of operations. Gross bad loans as of Dec. 31 were 14.62 billion rupees, or 3.1 percent of total loans.

The bank, which was spun off from IDFC Ltd, had total troubled assets of about 88 billion rupees, which it "self-identified" and made a "substantial provisioning cover" before migration of the balance sheet, Chief Executive Rajiv Lall said.

The bank's parent had previously said it would make 25 billion rupees of additional provisions for its fiscal second quarter to September.

"Our gross NPLs (non-performing loans) in the next six months or 12 months could go up in absolute terms... as a share of loan book it need not," Lall told a news conference on Wednesday.

"But it will not require additional provisions, it will not affect my earnings, it will not affect the risk or the quality of my overall book."

The bank aims to ramp up its retail lending and fee income, Lall said, adding they would launch a mortgage finance product soon.

IDFC Bank, which has 36 branches, will continue to expand the branch network, but focus was more on providing banking services using technology.

"We would much rather over-invest in technology and under-invest in branches. Our belief is that customer behaviour in India is changing so fast that it is now possible to build a bank which is very branch light," Lall said.

($1 = 67.9828 Indian rupees)

(Reporting by Devidutta Tripathy; editing by Susan Thomas)