IDBI Bank remains in red; posts net loss at Rs 36.02 billion loss for Q2

Public sector lender IDBI Bank remained in red as its net loss widened to Rs 36.02 billion for the second quarter, which ended on September 2018 on a sharp rise in provisions for bad loans. This is the eight quarter in a row that the bank has posted a quarterly loss. 

It had posted a net loss of Rs 1.97 billion in July-September quarter for the previous financial year. Sequentially, the losses surged from Rs 24.09 billion in April-June 2018. 

Its operating profit went down to Rs 8.5 billion in Q2FY19 from Rs 28.03 billion in the same quarter last year.

The ailing lender, which is under Reserve Bank of India's Prompt Corrective Action (PCA) regime, posted a drop in net interest income to Rs 13 billion in Q2FY19 from Rs 16.58 billion in the Q2 FY18. The other income also fell sharply to Rs 8.66 billion from Rs 22.98 billion in Q2 FY18.

Chief financial officer Ajay Sharma said that the bank's losses were mainly due to high provisioning and mark-to-market losses. He added that interest income for the bank was under pressure due to 30 per cent of their assets being non-performing assets (NPA).

The provisions for bad loans almost doubled to Rs 54.81 billion in Q2 FY19 from Rs 28.42 billion in the same quarter of FY18. The provision coverage ratio including technical write-offs stood at 68.72 per cent.

The gross non-performing assets (GNPA) stood at 31.78 per cent at Rs 608.7 billion at end of Q2 FY19, up from 24.98 per cent (Rs 513.6 billion) in Q2 FY18. The gross NPAs were at 30.78 per cent (Rs 578 billion) at end of Q 1FY19.

The capital adequacy ratio stood at 6.22 per cent with common equity tier I of 3.87 per cent at end of September 2018. The bank is currently in breach of the regulatory capital requirements but additional capital infusion by Life Insurance Corporation of India (LIC) would help meet them, said the bank's senior management. 

LIC plans to acquire 51 owe cent stake in the public lender with an infusion of Rs 22,000 core in total. Of this, around 20 billion has already been infused during the quarter while the remaining is subject to regulatory approval. 

The bank said that it is focusing on its ongoing consolidation and improving the quality of the book. 

"We are in the process of consolidation and our major emphasis is to realign our portfolio accordingly," said Rakesh Sharma, chief executive, IDBI Bank. He added that the bank is also focusing on the recovery of non-performing assets and has an exposure of Rs 250 billion to NLCT list 1 and 2. The bank expects a recovery of Rs 75 billion in the two upcoming quarters of which 45 billion is expected from NLCT cases which are at an advance stage of resolution. 

The bank said that it has an exposure to ILFS group parent, subsidiaries as well as Special purpose vehicle. The management refused to disclose the exact figure.

IDBI Banks' Rs 60.75 on the NSE, up by 1.33 per cent.

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