IDBI Bank Q3 net up 60% YoY to Rs 927 cr on improvement in margin

IDBI Bank's net profit for the third quarter ended December 2022 (Q3FY23) rose 60 per cent year on year (YoY) to Rs 927 crore on a sharp improvement in net interest margin (NIM).

The Mumbai-based private sector lender had posted net profit of Rs 578 crore a year ago (Q3FY22). Sequentially, the net profit rose from Rs 828 crore achieved in Q2FY23.

The banl's net onterest income (NII) improved by 23 per cent YoY to Rs 2,925 crore in Q3FY23 from Rs 2,383 crore in the third quarter if FY22. NII stood Rs 2,738 crore for Q2FY23.

The NIM improved to 4.59 per cent for Q3FY23 from 3.88 per cent a year ago. NIM stood at 4.37 per cent for Q2FY23. The cost of deposits may go up by 8-10 basis points in the current quarter. The bank will be able to achieve an NIM of 3.75 per cent by March 2023.

Its non-interest income declined by 25 per cent to Rs 857 crore from Rs 1,138 crore in Q3FY22. Sequentially, it dipped by 21 per cent from Rs 1,087 crore in Q2FY22. The de-growth in profit of sale of investments impacted the lender's non-interest income, said Rakesh Sharma, its managing director and chief executive.

IDBI Bank's asset quality profile improved with gross non-performing assets (GNPAs) at 13.82 per cent in December 2022, compared with 21.68 per cent a year ago. Sequentially, GNPAs were down from 16.51 per cent in September 2022.

GNPAs will be down below 10 per cent by end of March 2023, Sharma said.

Net NPAs dipped to 1.07 per cent from 1.81 per cent a year ago. Sequentially, they improved from 1.15 per cent in July-September 2022.

The provision coverage ratio (PCR) rose to 98 per cent for the quarter under review from 97.1 per cent a year ago. Sequentially, it improved from 97.8 per cent in July-September 2022.

IDBI Bank has transferred a large NPA account--that of JP Infratech, to whom it had an exposure of over Rs 3,700 crore--to National Asset Reconstruction Company Ltd. This is first such transfer to NARCL by any lender to the government-backed ARC. The total exposure of lenders is over Rs 9,000 crore. NARCL is paying 15 per cent upfront in cash and is issuing Securities Receipts (SRs) for the balance. These SRs are guaranteed by Central Government.

The bank’s loan book grew by 17 per cent YoY to Rs 1.46 trillion for the third quarter ended December 2022.

Sharma said with the strong momentum seen so far, the bank is raising the guidance for credit growth to 15 per cent for FY23 from 10-12 per cent earlier.

The deposits grew by 5.0 per cent YoY to Rs 2.32 trillion in October-December 2022.

Sharma said the low growth in deposit has been matter of concern. The bank has started taking bulk deposits and is looking to grow its overall deposits by 8-10 per cent YoY by March 2023.

The share of low-cost money--current account and savings account (CASA) deposits--declined to 54.44 per cent at end of December 2022 from 56.19 per cent in July-September 2022 and 54.69 per cent a year ago.

The capital adequacy ratio (CAR) was 20.14 per cent in December 2022 from 16.75 per cent a year ago.

On any update the divestment of government and Life Insurance Corporation of India's stake, CEO said multiple parties have shown interest. As of now nine of them have approached for further processing.