IDBI Bank Q1 net up 34% on higher NII, eyes 15% loan grow

IDBI Bank’s first quarter net profit rose nearly 34% year-on-year at Rs 335 crore, driven by a jump of 36% in its net interest income (NII) at Rs 1,152 crore. However, the net interest margin or NIM contracted marginally from 2.10% to 2.07% quarter-on-quarter.



“We would maintain our NIM in the range of 2.10-2.20% in FY12,” P Sitaram, CFO, IDBI Bank told Moneycontrol.com.



“We will not grow our loan book aggressively unless we attain a mandated target of 40% priority sector loans. However, we will sustain around 15% loan growth for the full year. Asset quality may come under stress in the next two quarters but we are expecting better performance in March quarter.”



As per regulations, banks are supposed to lend in priority sector which typically includes loans in agriculture and SME sectors. As on June, the bank has around 30% exposure in priority sector.



Net non-performing assets (NPAs) increased sequentially from 1.06% to 1.25% while the gross non-performing assets too went up from 1.70% to 2.10%. The lender sees some stress in assets coming out from small companies due to rising interest rates.



However, it does not see any systemic risk from its large coporate borrowers. The lender has hiked its lending rates on Friday by 75 bps to 10.75% (base rate) and 15.25% (benchmark prime lending rate).



The bank has made additional provisions of Rs 280 crore on the backdrop of the Reserve Bank of India’s new provisioning norms. However, provisions fell from Rs 502 crore to Rs 426 crore Y-o-Y.



According to the CFO, the incremental bad loans were higher in Q1, 2010-11, which in turn, had resulted in higher provisioning.

In April this year, the Reserve Bank of India increased provisioning norms from 10% to 15% on sub-standard assets while standard restructured assets too have to be provided at 2% as against 0.25-1% earlier.

IDBI Bank’s deposits grew 12% at Rs 1,54,984 crore. CASA (Current Account and Savings Account) ratio stood at 17.3%.

“We would like to increase our CASA ratio to 22% by March, 2012. We are focusing more on branch banking. Total number of branches should scale up to 1,000 from 858 in March quarter,” said Sitaram.

IDBI Bank shares were down 1% at Rs 129 at the close of Friday’s trading.

Source: www.moneycontrol.com

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Gaurav Agarwal
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DENIP Consultants Pvt Ltd