On Monday, IDBI Bank, a private sector bank, announced a net profit of ₹1,224 crore in Q1FY24, marking a significant 62% increase from the same period last year, primarily driven by higher net interest income. The bank’s net interest income witnessed remarkable growth, rising 61% year-on-year to reach ₹3,998 crore.
The bank successfully maintained its net non-performing asset (NPA) ratio at less than 0.5% during the three months ending in June. This accomplishment was aided by a proactive approach in setting aside provisions. As of 30 June, the net NPAs accounted for 0.44% of net advances, showing a sequential decline of 48 basis points (bps). Additionally, the gross bad loans for the June quarter stood at 5.05%, down from 6.38% reported in the March quarter.
The bank’s provision coverage ratio (PCR), including technical write-offs, reached an impressive 98.99% during the June quarter. In the same period, IDBI Bank allocated ₹770 crore in additional provisions against NPAs at rates higher than those prescribed by the Reserve Bank of India. This decision was based on the management’s assessment of the degree of impairment in various categories of advances. The PCR indicates the percentage of bad loans for which a bank has set aside provisions.
As per Rakesh Sharma, the Chief Executive of IDBI Bank, the bank made these additional provisions as a prudent measure, adhering to its policy of building strong buffers. He mentioned that the bank’s PCR is already close to 99%, leaving limited room for further adjustments. According to him, the bank remains committed to focusing on recovering bad loans and addressing technically written-off loans to bolster the overall health of its balance sheet.
In a related development, on 29 December, IDBI Asset Management Ltd., IDBI MF Trustee Company Ltd., LIC Mutual Fund Asset Management Ltd., and LIC Mutual Fund Trustee Pvt Ltd entered into an agreement to transfer IDBI mutual fund schemes to LIC MF. The proposed transfer of AUM received approvals from the Competition Commission of India (CCI) on 23 March and from the Securities Exchange Board of India (SEBI) on 3 April.
The stock responded moderately to the results. It closed at Rs.57.90 on NSE, after gaining 0.78%.