IDBI Bank net up fourfold on recovery of Kingfisher dues, higher other income

The net interest margin (NIM) of the lender improved 125 basis points (bps) YoY to 4.06%, but declined 108 bps, sequentially.

Private lender IDBI Bank on Wednesday reported a 318% year-on-year (y-o-y) jump in net profit to Rs 603 crore for the quarter ended June 2021, due to higher other income and recovery from Kingfisher Airlines account. The strong bottom-line was reported by the lender despite a 84% y-o-y increase in provisioning to Rs 2,173 crore.

It’s operating profit increased 109% year on year (YoY) to Rs 2,776 crore on the back of 41% y-o-y growth in the net interest income (NII) to Rs 2,506 crore. Total recovery from Kingfisher Airlines during the quarter was Rs 733 crore, of which the interest portion of Rs 455 crore got reflected in NII and the principal amount of Rs 278 crore was shown in other income component by the lender.

Other income increased 63% YoY and 39% quarter on quarter (QoQ) to Rs 1,639 crore, which included commission exchange and brokerage of Rs 404 crore and treasury income Rs 690 crore, among others. The net interest margin (NIM) of the lender improved 125 basis points (bps) YoY to 4.06%, but declined 108 bps, sequentially.

Rakesh Sharma, MD and CEO, IDBI Bank, said, “The bank’s capital and liquidity position is strong and would continue to be the focus area. We are expecting credit growth of 8-10% by the end of March 2022.”

The asset quality remained a mixed bag during the June quarter. The gross non-performing assets (NPAs) ratio of the lender increased 34 basis points to 22.71%, compared to gross NPAs of 22.37% in the previous quarter. However, net NPAs ratio improved 30 basis points to 1.67% from 1.97% in the March quarter. “We are expecting GNPAs to come below 15% due to loans being transferred to National Asset Reconstruction Company (NARCL) and expected loan growth,” Sharma said.

Recovery from technically written off accounts improved to Rs 331 crore during the June quarter, compared to Rs 117 crore in Q1FY21 and Rs 269 crore in Q4FY21.

The lender has strengthened its balance sheet by increasing provision coverage ratio (PCR) by 271 basis points to 97.42% in June 2021. While the cost of deposits reduced by 93 basis points YoY to 3.72%, the cost of funds came down 98 basis points YoY to 3.98%. Similarly, cost to net income ratio decreased by 1923 basis points YoY to 33.02% during the June quarter.

Advances declined 6% YoY and 3% QoQ to Rs 1.56 lakh crore. However, the retail corporate ratio in gross advances improved to 62:38 from 57:43 as on June 2020. As the lender has come out of the Reserve Bank of India’s prompt corrective action framework, the bank aims to grow its base in corporate credit. “We will look to engage with corporates in cautious and calibrated manner,” Sharma said.

Deposits grew 1% YoY to Rs 2.2 lakh crore, but declined 3% sequentially. The share of current account savings account (CASA) in total deposits improved 489 basis points YoY to 52.44%, compared to 47.55 in June 2020. IDBI Bank is working towards realising business synergies with LIC.

For the quarter, the bank has done a premium collection of Rs 32 crore for LIC and earned a fee income of Rs 5 crore, it said. The capital adequacy ratio (CAR) stood at 16.23% during the June quarter, compared to 13.37% as on June 30, 2020.