IDBI net drops 9.7% amid high fund cost, Kingfisher account

The youngest public sector lender IDBI Bank today reported a 9.7 percent dip in its third quarter earnings to Rs 410 crore on rising bad loans and higher interest expenses.

"We had to take a hit on our post-tax profit due to a one-time provision of Rs 105 crore on account of an aviation account which has become non-performing (the bank has a Rs 700-crore bad loan exposure to Kingfisher Airlines), during the December quarter, which pushed up our gross bad loans to Rs 750 crore," chief financial officer P Sitaram told PTI in a post-result conference call.

Banks have to make 15 percent provisioning for the bad loans in the aviation sector under the RBI norms.

However, he expressed the hope that the bank will be able to maintain its full year earnings at least at the previous fiscal level.

The bank also has nearly 1,000 crore exposure to the troubled national carrier Air India, which is not a substandard asset.

The city-based lender had reported Rs 454 crore profit in the corresponding quarter last year.

A healthy 24 percent growth in interest income to Rs 584.9 crore was offset by higher interest expenses which jumped 37 percent to Rs 479 crore during the quarter, the bank said in a filing to the exchanges this evening, which brought down net profit and earnings per share by 10 and 15 percent, respectively.

Another disappointment came from an 11 percent drop in net interest income during the quarter to Rs 1,059.34 crore from Rs 1,193.27 crore year ago, whereas non-interest income rose to Rs 431.83 crore from Rs 457.96 crore.

The bank's total income rose to Rs 6,281.04 crore, up by 22 percent against Rs 5,159.54 crore in the year-ago quarter.

For the nine months, net profit rose 11 percent to Rs 1,260.83 crore, compared with Rs 1,134.07 crore, helping the bank announce a Rs 2 per share interim dividend for the year.

Net interest income for the nine-months period rose 5 percent to Rs 3,333.93 crore from Rs 3,162.48 crore, while non-interest income declined by 8 percent to Rs 1,341.83 crore from the Rs 1,465.99 crore.

For the first three quarters, its income rose 24 percent to Rs 18,632.29 crore from Rs 14,983.82 crore year ago.

Deposits rose 18 percent to Rs 1,77,123 crore during the period from Rs 1,50,239 crore, while advances jumped 16 percent to Rs 1,56,217 crore up from Rs 1,34,491 crore, the bank said.

Total business grew 17 percent to Rs 3,33,340 crore up from Rs 2,84,729 crore, while total assets grew by 16 percent to Rs 2,55,888 crore rising from Rs 2,21,099 crore as at the end of December 2010.

Aggregate assets as of December end stood at Rs 2,55,888 crore as against Rs 2,21,099 crore, registering a growth of 16 percent.

Fee income stood almost flat during the quarter at Rs 361 crore as against Rs 358 crore.

The higher provisioning has impacted the capital adequacy ratio which declined to 13.53 percent (tier I being at 7.54 percent) from 14.10 percent (tier I at 8.84 percent) in the year ago period.

Sitaram, who ruled out any immediate cut in lending rates, expressed the hope that cost of funds will not rise from now on and that he expects interest rate to come down from the first quarter of the next fiscal.

IDBI Bank shares went up 4.06 percent to Rs 101.30 on the BSE whose main gauge sensex jumped nearly 2 percent or 330.30 points.

Source: EconomicTimes