CEO Rakesh Sharma said the bank now expects an average growth 10% led by a 10% to 12% growth in retail loans in the fiscal ended March 2022.
Net interest margin (NIM) excluding the interest earned due to the income tax refund fell to 3.06% from 3.80% at the end of March 2020.
The Life Insurance Corp of India (LIC) owned lender is among the banks put on the block by the government and strong numbers are likely to help the sale process.
Net profit was supported a 38% rise in net interest income (NII) to Rs 3240 crore from Rs 2,356 crore in the quarter ended March 2020.
More importantly, a Rs 2305 crore of tax refund for legacy cases between 1998 and 2001 in the fourth quarter led to a net tax write back of Rs 90 crore during the quarter boosting profit.
“We have also gained Rs 1308 crore in interest from this write back which we have used for provisions as a prudent measure. Now we will go for growth in a calibrated manner also in mid and large corporate space besides retail,” said Rakesh Sharma, CEO, IDBI Bank which was released from Reserve Bank of India’s (RBI) prompt corrective action (PCA) restrictions in March after almost four years.
IDBI Bank’s net profit almost quadrupled to Rs 512 crore in the quarter ended March 2021 from Rs 135 crore a year earlier, helped by a one time tax write back and lower operating expenses even as the bank stepped up on provisions to deal with second wave of the Covid pandemic and also legacy bad loans.
The bank chose to use the windfall gains from the tax write back to hike provisions adding Rs 500 cr in Covid related provisions to the Rs 363 crore it already held in its books. It further made a Rs 908 crore accelerated provisions to deal with likely stress in the short term and also set aside Rs 800 crore to meet any shortfall in recovery of Stressed Assets Stabilization Fund (SASF) Trust set up by the Government of India during the reorganisation of the erstwhile development finance institution IDBI in 2004 as the trust’s tenure ends in September 2024.
As a result the bank’s total provisions increased 55% to Rs 2457 crore from Rs 1584 crore a year earlier. The trust currently holds residual bad loans of about Rs 3000 crore currently with total provisions of Rs 1100 crore at the end of March 2021.
With a provision coverage ratio of 96.90% the bank has the highest cover for bad loans among banks in India and has covered for more than Rs 32,000 cr of gross NPAs out of the total Rs 36,212 cr on its books. Gross NPAs are down from a peak of 38% of loans in September 2018.
Other income fell 11% to Rs 1181 crore in March 2021 from Rs 1326 crore a year earlier mainly as recoveries from written off accounts fell and sales of priority sector loans were lower.
Sharma said the bank expects to maintain its NIM at around 3% and restrict slippages to 2% of loans next fiscal.
The bank has restructured a total of 3356 corporate and retail accounts with an exposure of Rs 2234 crore for which it has provided Rs 76 crore.
The LIC owned bank collected total premium of Rs 863 crore for the life insurer earning a fee income of Rs 62 cr. IDBI Bank now contributes half of the premium collected for LIC through the bancassurance channel.
