IDBI Bank Q2 net up 20% at Rs 516 cr on lower provisioning

IDBI Bank ’s second quarter net profit rose better-than-expected 20% year-on-year to Rs 516 crore on the back of lower provisioning against non-performing assets (NPAs) and lower operation costs. An estimate by CNBC-TV18 expected net profit at Rs 387 crore.

“Our provisioning against NPAs stood at Rs 183 crore in September quarter compared with Rs 319 crore in the same quarter in FY11. In the previous year, we had to attain RBI’s stipulated 70% provisioning coverage ratio. Hence, we provided additionally. Moreover, lower operations costs too aided to the bank’s bottomline,” P Sitaram, CFO, IDBI Bank told Moneycontrol.com.

The rising interest cost seems to have dented bank’s net interest margin (NIM), which stood at 2% as against 2.07% recorded in the June quarter. Similarly, net interest income (NII), the difference between interest income and interest expenditure slightly fell from Rs 1,125 crore in Q2, FY11 to Rs 1,122 crore in the Q2, FY12. Operating expenses fell more than 6% Y-o-Y to Rs 595 crore.

Meanwhile, IDBI Bank’s loan book expanded 20% to Rs 1.56 lakh crore, though the bank expects the growth to be around 15% by the end March, 2012. Its cost of funds increased by 40 basis points to 8.40% during the quarter.

“With an economic slowdown, we are going through tough time. However, we will grow our book mostly through priority sector lending. As per RBI’s stipulation, we have to achieve 40% target for our priority sector lending before 2013. So far, we have achieved 30%,” said Sitaram who sees some stress on asset quality in the coming two quarters.

IDBI Bank’s gross NPAs rose from 2.10% to 2.47% quarter-on-quarter while net NPAs increased from 1.25% to 1.57% during the three months period. The lender has 7.9% exposure in the troubled power sector amounting to around Rs 12,000 crore.

“So far, we do not see any problem in those assets. The problem may lie in the future. However, we do not have any exposure to SEBs. In the entire FY12, NPAs would remain at the current level and might deteriorate slighly,” added Sitaram.

According to rating agency Crisil, loans amounting to Rs 56,000 crore to the power sector may come under trouble. This exposure amounts to 12% of the total power sector loans of Rs 4.8 lakh crore. State electricity boards (SEBs), Crisil suggested, need to hike power tariff for timely payments to their lenders.

Its total deposits climbed 13% Y-o-Y to Rs 1.74 lakh crore. The share of current account and savings account (CASA) to total deposits rose to 19.19% compared with 15.26% a year back.

IDBI Bank shares on Thursday fell more than 2% to Rs 105 on the NSE.

Source: www.moneycontrol.com

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Gaurav Agarwal
Head Dealer
DENIP Consultants Pvt Ltd