Saturday, May 26, 2018

Bad loans drive IDBI to ₹5,662.76 cr. quarterly loss

Lender charts revival plan; puts ₹21,000 cr. NPAs on block

State-run lender IDBI Bank reported loss for the sixth straight quarter even as the bank’s management assured that most of the bad loans have been recognised and could turn to black after the second quarter of the current financial year.
The lender reported a net loss at ₹5,662.76 crore in the quarter ending March 2018 due to higher provisioning for non-performing assets (NPAs) as compared to a net loss of ₹3,199.77 crore in the same period of the previous year. This is the second highest quarterly loss after Punjab National Bank, which posted ₹13,417 crore loss in the same quarter.
The loss was on the back of ₹12,800 crore slippages during the quarter that led to ₹10,733 crore of provisions for bad loans, as compared with ₹6,054 crore in the year earlier period.

Legacy issues

“Most of the legacy issues regarding asset quality has been recognised,” said M.K. Jain, MD and CEO of IDBI Bank, in the post earnings media interaction. “Whatever is remaining should get cleaned up by the second quarter of the current financial year,” he said, adding that the bank had decided to halt lending to the corporate sector from where the maximum stress was coming.
The bank has drawn up a plan to boost its capital by sale of non-core assets and also shed riskier assets. The lender’s capital adequacy ratio fell to 10.41%, as compared with 11.93% in the third quarter, after it decided to pre-pay investors of additional tier-I capital bonds (AT-1), a move that will save the bank ₹550 crore of interest income every year. To clean up the balance sheet further, the bank board has approved sale of bad loans of more than ₹21,000 crore.
The board has also decided to divest stake in the mutual fund arm, in which the bank has 67% stake and IDBI Capital, another subsidiary of the bank, 33%. Mr. Jain said IDBI Capital would divest about 26-30% stake to a strategic partner.

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