IDBI Bank posts Rs 3,199 crore loss

IDBI Bank's huge concentration of loans to troubled sectors like power and iron and steel sectors continued to plunge the bank into deep losses.

For the quarter ended March 31, 2017, the bank reported a loss of Rs 3,199.76 crore and if it was not for a tax writeback of Rs 1620.02 crore the losses would have been higher. The bad performance battered the shares of the bank, which closed 7.77% lower than the previous day's close.

Gross non-performing assets (NPAs) soared 80% to Rs 44,752.59 crore at the end of the March quarter from Rs 24,875.07 crore a year ago. The bank reported gross NPA of Rs 35,245.33 crore a quarter ago. Provisions jumped 39.54% to Rs 6,209.58 crore from Rs 4,450.15 crore year on year.

The only silver lining is the positive growth both in the net interest income (NII) and the Net Interest margin (NIM). The growth in the NII which is the core income of the bank grew 14.44% to Rs 1,633.29 crore from Rs 1,427.24 crore in the year-ago period. NIM for the full year climbed eight basis points to 1.75 % during the quarter. However, the other income which includes fees or the non-core income of the bank declined 21.17% to Rs 1,061.52.

Rating agency S&P said in a release, "We expect earnings to remain weak over the next 12-18 months, largely because of IDBI's high credit costs (given its weak asset quality and low reserve coverage) and low net interest margins (NIMs)."

IDBI Bank's performance has been weak over the past two years with stressed asset quality and high credit costs straining its earnings. Its NPLs spiked to 21.3% as of March 31, 2017, from 15.2% in the previous quarter. The bank reported a loss of Rs 5,070 crore for full fiscal 2017.

S&P said the Prompt Corrective Action (PCA) by the Reserve Bank of India will entail the latter's frequent and focused monitoring of IDBI, as well as restrictions on distributing dividends, expanding its branch network, or undertaking any major capital expenditures.

PCA may accelerate capital conservation by shedding high-risk assets and reducing the concentration of loans to high-risk sectors. PCA may also be accompanied by asset quality reviews, which could lead to broader recognition of weak loans, accelerated provisioning and a tighter loan-review mechanism.