Indian Bank Q4 profit drops 59% to Rs 1.3 bn on higher NPA provisioning

Lender takes 41 accounts to NCLT, hopes to recover Rs 20 billion

Indian Bank is planning to raise around Rs 30 billion capital to support its growth during 2018-19. The capital would help the lender to reach a total book size of Rs 4.25 trillion from Rs 3.71 trillion.

The bank will look at QIP and rights issues during the current fiscal to support the target, Kishor Kharat, Managing Director and CEO, Indian Bank told Business Standard in an interview. He added, the government may not pump in capital into the bank as it has to bring down its stake to 70 per cent from 82.87 per cent.

Meanwhile the bank's fourth quarter profit has dropped by 59 per cent to Rs 1.31 billion from Rs 3.19 billion during the same quarter of previous financial year. The drop was due to increase in provision coverage ratio to 65 per cent from 59 per cent,he said.

Besides this, due to pressure in the bond market, sale of investment dropped to Rs 6.62 billion from Rs 8.72 billion. He added that the recent circular of RBI relates to revised resolution guidelines for resolution mechanism has resulted in an increase of Rs 17 billion during the fourth quarter.The total income grew by 7.6 per cent to Rs 49.54 billion during the quarter compared to Rs 46.01 billion a year ago.

The gross NPAs percentage dropped down to 7.37 per cent at Rs 119.90 billion from 7.47 per cent at Rs 98.65 billion during the same quarter last year. The net NPAs have come down to 3.81 per cent at Rs 59.59 billion during the quarter from 4.39 per cent at Rs 56.06 billion during same period last year.

Kharat said the bank has an exposure of Rs 35 billion in the 18 accounts that were were referred to NCLT by RBI. Against the required provisioning of Rs 18.33 billion, the bank has provisioned Rs 24.67 billion.The bank has sold assets worth Rs 4.82 billion last year.

Apart from the RBI list, the bank has taken 41 accounts to NCLT. The total size of these accounts is about Rs 54.81 billion, out of which the bank is optimistic of recovering Rs 20 billion. He added that the slippages were around Rs 5 billion quarter-on-quarter last year and that the lender hopes to continue to maintain the momentum.

The year 2017-18 has been challenging for the banking industry due to stressed portfolios, asset quality and regulatory changes. Despite these challenges, Indian Bank has managed to do well, said Kharat.

The bank had set a target of Rs 3.6 trillion in total business for 2017-18, and exceeded it by closing the year with Rs 3.71 trillion.

Last year the bank announced its five-year plan, which envisaged doubling its total business in five years.

The lender is targeting to make it 60 per cent non corporate and 40 per cent corporate this year. Its capital adequacy ratio stood at 12.55 per cent.