IDBI Bank Q4 net jumps 278% on higher NII, one-off tax refund

Net interest margin (NIM) stood at 5.14%, up 227 basis points (bps) sequentially.

The net profit of IDBI Bank for the quarter ended March rose 278% year-on-year (y-o-y) to Rs 512.2 crore on the back of a rise in the net interest income (NII) and a one-time gain of Rs 299.52 crore on account of tax refunds for the assessment years FY1998-1999 to FY2000-2001.

The bank said it has set aside another Rs 1,300 crore worth of interest refund from the same tax-related income as provisions for Covid (Rs 500 crore) and as accelerated provisions for assets housed in the Stressed Asset Stabilisation Fund (SASF) (Rs 800 crore).

Rakesh Sharma, managing director and chief executive officer, said in FY21, the lender has posted its first full year of profit after five years of losses. The bank exited the prompt corrective action (PCA) framework on March 10. “We were able to recover around Rs 6,025 crore and slippages were also under control. This year, despite the Covid situation, our slippages were Rs 2,382 crore. We had targeted to keep slippages below 2%, at which we have succeeded. Our collection efficiency has also improved and now we are at pre-Covid level of 95%,” he said.

The pre-provisioning operating profit rose 54% y-o-y to Rs 2,879 crore. NII, or the difference between interest earned and interest expended, increased 37.5% y-o-y to Rs 3,240 crore. Net interest margin (NIM) stood at 5.14%, up 227 basis points (bps) sequentially.

Provisions rose 55% y-o-y to Rs 2,456.65 crore in Q4FY21. The asset quality performance was a mixed bag as the gross non-performing asset (NPA) ratio improved to 22.37% in Q4FY21 against 23.52% in the previous quarter. The net NPA ratio rose three bps to 1.97%, as compared to 1.94% in the December quarter. The provision coverage ratio (PCR) improved to 96.9% as on March 31, 2021 from 95.9% as on December 31, 2020.

IDBI Bank intends to keep credit cost and the slippages ratio at under 1.5% and 2%, respectively, on a sustained basis. It will target NIM to remain above 3%. By FY24, it intends to achieve a return on assets (RoA) of 1%. For FY22, the target is a return on equity (RoE) of 12%. The RoA for Q4FY21 stood at 0.7%.

The bank’s total deposits rose 4% y-o-y to Rs 2.31 lakh crore at the end of March 2021. The value of current account savings account (CASA) with the bank stood at Rs 1.16 lakh crore. The share of CASA in total deposits improved to 50.45% as on March 31, 2021, against 47.74% as on March 31, 2020.

Gross advances fell 5.7% y-o-y to Rs 1.62 lakh crore in March 2021. Retail loans accounted for 62% of the total loan book. After its exit from the PCA framework, IDBI Bank will return to lending in the corporate segment. It expects an 8-10% growth in the corporate book in FY22 and a 10-12% growth in structured retail assets.