 "IDBI Bank aims to double business to Rs 10 lakh crore")
A day after government spoke about idea to reducing its stake in IDBI Bank below 50 per cent, public sector bank unveiled three year plan to double business to Rs 10 lakh crore by March 2019.
Bank has estimated that it will need over Rs 30, 000 crore in capital to back loan book of Rs 5.5 lakh crore by March 2019. It estimated business - deposits plus advances - to touch Rs 10 lakh crore by March 2019. The bank stock closed higher by 1.8 per cent at Rs 59.5 per share on Bombay Stock Exchange today.
Its managing director and chief executive K P Kharat said, "We are assuming organic growth in business and the plan is expand business at 20 per cent compounded annual growth. This plan is about business and independent of the any change in stake-holding pattern."
"Though asset quality pain will be around for some more time, the low business volume phase will be behind us. Now approach is to catch up and grow above banking industry average growth trend", he said while elaborating the blue print to reporters.
Bank has estimated an additional capital requirement of Rs 31,000-Rs 32,000 crore. It pegged common equity capital at Rs 18,000-Rs 19,000 crore, additional Tier- I bonds of Rs 4,000 crore and tier II capital of over Rs 8,000 crore. Besides raising capital through equity offering to institutional and strategic investors, bank will offload stake in non-core investments and raise up to Rs 6,500 crore.
This would shore up the Common Equity capital.
It is raising Rs 1,500 crore in equity capital by issuing share to Life Insurance Corporation of India (LIC) on preferential basis. It has priced share at Rs 53.44 a share.
Its capital adequacy ratio was 13 per cent with Tier-I capital of 8.71 per cent, at end of December 2015. It wants to improve CAR to 16 per cent by March 2019.
After the offering, LIC would hold 19.18 per cent stake in IDBI Bank, up from 7.24 per cent. The Indian government's shareholding would decline to 69.84 per cent from 80.16 per cent.
Bank has kept on hold plans for Qualified Institutional Placement (QIP) offering for equity shares worth Rs 3,771 crore. Though held road shows for QIP and there was good investor interest, it decided to differ the offering due to adverse market conditions.
The government, the lender's majority shareholder, had already infused Rs 2,229 crore in the bank in 2015. The lender had reported a loss of Rs 2,183 crore in the third quarter ended December 2015 on huge provisions for bad loans. It had posted net profit of Rs 327 crore in October-December 2014.
It would cut gross non-performing assets (NPAs) to less than 3 percent by financial year ending March 2019. It's Gross NPAs for third quarter ended December 2015 stood at 8.94 per cent when the company posted a loss of Rs 2,184 crore.
The public sector bank expects to be a "near zero net NPA" lender by financial year 2019 by stepping up efforts to recover bad loans. At end of net NPAs 4.6 per cent in December 2015.
IDBI BANK IN MARCH 2019
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Net interest margin around three per cent
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Return on asset - 1%; Return on equity - 13%
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Reach capital adequacy ratio of 16%
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Gross non-performing loans 3% and zero net NPAs
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Cost to income ratio 35% (now 43.88%)
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Raise share of low-cost deposits to 35% from 25%
- Raise retail loan book share to 41 % from 33%
