IDBI Bank posts Q1 PBT of Rs 438 cr against Rs 5,381 cr loss a year ago

Private sector lender IDBI Bank has posted a profit before tax (PBT) of Rs 437.97 crore for the quarter ended June 2020 (Q1FY21) on a rise in net interest income and a dip in provisions and contingencies.

The subsidiary of Life Insurance Corporation (LIC) had posted a pre-tax loss of Rs 5,381.1 crore in quarter ended June 2019 (Q1FY20).

Its net profit for the reporting quarter stood at Rs 144.43 crore as against net loss of Rs 3,800.84 crore in Q1FY20. It had posted a net profit of Rs 135.39 crore in the fourth quarter ended March 2020.

The bank's stock closed 3.66 per cent higher at Rs 38.25 per share on the BSE. The lender is under the Reserve of Bank of India’s Prompt Corrective Action (PCA) regime due to a weak financial and asset quality profile. PCA puts certain restrictions on taking large corporate exposures. The bank will approach RBI to updated performance and make a plea for taking it out of PCA.

IDBI Bank's net interest income (NII) grew by 22 per cent on year-on-year, from Rs 1,773 crore in Q1FY20 to Rs 1,458 crore in Q1FY21. The net interest margin (NIM) also improved to 2.81 per cent in Q1FY21 from 2.13 per cent in Q1FY20, and from 2.61 per cent in the immediately preceding quarter (Q4FY20). This was despite a contraction in the loan book over June 2019 and March 2020. The reduction in cost of funds helped the bank to report improvement in margins.

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The other income comprising fees, commissions etc rose from Rs 832 83 crore in Q1FY20 to Rs 1,003.60 crore in Q1FY21.

Provisions (including for non-performing assets) and contingencies reduced sharply at Rs 888.05 crore in Q1FY21 from Rs 6,332.05 crore in Q1FY20.

The bank made further Covid-19 related provisions of Rs 189 crore in Q1FY21 to cushion the balance sheet from the impact of pandemic. The cumulative provisions for Covid-19 impact are about Rs 436 crore. The provisions made by the bank are more than minimum required as per RBI guidelines.

The Provision Coverage Ratio (PCR) improved to 94.71 per cent in Q1FY21 from 87.79 per cent in Q1FY20. PCR was at 93.74 per cent in March 2020.

The bank's asset quality profile improved during the reporting quarter. Gross non-performing Assets (GNPAs) stood at 26.81 per cent in Q1FY21 from 29.12 per cent in Q1FY20. The GNPAs were at 27.53 per cent at end of March 2020.

Net NPAs declined to 3.55 per cent in June 2020 from 8.02 per cent in June 2019 and from 4.19 per cent in March 2020.

Rakesh Sharma, Managing Director & CEO, IDBI Banks said bank has made recoveries worth Rs 520 crore in Q1 and going forward bank is looking to make recoveries of Rs 1,000 crore in each quarter.

The total deposits shrunk by 4.94 per cent at Rs 2,19,379 crore and advances shrunk by six per cent Y-O-Y to reach Rs 1,65, 890 crore as on June 30, 2020.

The loans under moratorium, a standstill on repayment under COVID19 regulatory steps, declined at 51-52 per cent (by value of loan book) by three week of July 2020 from 66 per cent (by value) few months ago. Almost 2,000 home loan borrowers are approaching on daily basis with request to move out of moratorium, Sharma said.

The Capital Adequacy Ratio (CAR) stood at 13.37 per cent as on June 30, 2020 with Tier I at 10.59 per cent. Bank is seeking share-holders approval to raise equity capital of Rs 11, 000 crore to strengthen capital adequacy.

While current capital is adequate support business growt, bank would like additional cushion to absorb any slippages due to COVID19 pandemic. Bank will begin preparations for raising equity capital in one month from now, Sharma added.