IDBI Bank expects balance sheet stability by March 2019

With capital infusion from the government and a turnaround plan in place, IDBI Bank expects stability to return to its balance sheet by March 2019.

The government-owned bank, in the red due to large provisioning for loans gone bad, posted a net loss of Rs 198 crore in the quarter ended September (Q2), from a profit of Rs 56 crore in the same period of 2017. The net loss for the June quarter (Q1) was Rs 858 crore.

However, operating profit rose by 81.7 per cent to Rs 2,798 crore in Q2 from a year before (it was Rs 877 crore in Q1).

M K Jain, managing director, said the growth in operating profit was expected to be 20-22 per cent for the financial year ending March 2018.

In September, the bank hired The Boston Consulting Group (BCG) to accelerate its turnaround plan and improve financial performance. IDBI is supposed to focus on four areas -- revenue enhancement, cost control & reduction, asset productivity and overall programme management, in consultation with BCG.

Executives said the results of this effort were expected in the year's second half and help to repair the balance sheet in 2018-19.

The loan book shrank by 10.9 per cent at Rs 205,670 crore by end-September. The bank will so structure the loan portfolio that the retail (to individuals) and corporate segment have about the same share by September 2018. At present, the retail book is 43 per cent and corporate credit is 57 per cent.

The bank has been liquidating its non-core assets and investments to raise money for capital adequacy. It booked capital gains of about Rs 1,400 crore till September from the sale of non-core assets. It sold 10 per cent in the Small Industries Development Bank of India to a clutch of financial institutions and banks. It would shed another six per cent stake in the year's second half. The bank has also put on the block its entire 30 per cent stake in National Securities Depository Ltd.

IDBI expects slippage to be Rs 5,000-6,000 crore in the second half of this financial year. Gross non-performing assets were Rs 51,367 crore (24.9 per cent) at end-September 2017, from Rs 30,133 crore (13.1 per cent) a year before. At end-June, it was Rs 50,173 crore (24.1 per cent).

The capital adequacy ratio improved in the September quarter, the government and Life Insurance Corporation infusing Rs 1,800 crore. At end-September, this was about 12 per cent, from 11.64 per cent a year before. Common Equity Tier-1 was 6.56 per cent.

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