With provisions for bad loans remaining at an elevated level, IDBI Bank, which was acquired by Life Insurance Corporation recently, on Monday posted a steep rise in net loss to Rs 4,185.48 crore for the third quarter ended December 2018 as against a loss of Rs 1,524.31 crore in the corresponding quarter of the previous fiscal. As the bank had posted a loss of Rs 3,602 crore in the September quarter, the total loss of the bank in the last two quarters amounted to Rs 7,787 crore, which is almost 65 per cent of the amount of around Rs 12,000 crore put in by LIC to acquire 51 per cent stake in the loss-making bank.
LIC had taken special permission from insurance regulator IRDAI to invest 51 per cent stake in IDBI Bank as the current rules allow only up to 15 per cent stake by an insurer in a listed company. The final tranche of the equity shares of IDBI Bank were allotted to LIC at a price of Rs 60.73 per share (inclusive of a premium amount of Rs 50.73 per share) on January 21, 2019. The loss of Rs 7,787 crore has come after the LIC injected money into the bank.
However, the bank said its gross non-performing assets (NPAs) declined on a quarter-on-quarter basis, recoveries improved and the bank has met the regulatory capital requirement following LIC’s capital infusion.
Already under PCA, woes of the bank far from over
The woes of IDBI Bank which is under the Prompt Corrective Action (PCA) of the RBI are far from over. The bank has suffered a loss of over Rs 7,700 crore, wiping out nearly 65 per cent of the funds injected by the new owner — LIC — in the last two quarters. While the bank has said it’s well-positioned to return to a profitable growth path and exit PCA in a time-bound manner, it remains to be seen how the bank will recover the money stuck with loan defaulters.
Total income decreased to Rs 6,190.94 crore for the quarter, compared with Rs 7,125.20 crore in the corresponding quarter a year ago, IDBI Bank said in a statement. The bank’s gross NPAs and the net NPA ratio improved to 29.67 per cent and 14.01 per cent respectively as on December 31, 2018, as against 31.78 per cent and 17.30 per cent respectively as of September 2018. In absolute numbers, gross NPAs declined from Rs 60,875 crore in the September quarter to Rs 55,360 crore in the December quarter. However, on a year-on-year basis, NPAs went up from 24.72 per cent in the year-ago period. Net NPAs declined to 14.01 per cent of the total advances, from 16.02 per cent in the December 2017 quarter.
The bank’s provision for bad loan increased to Rs 5,074.80 crore, compared with Rs 3,637.49 crore a year ago. However, slippages were Rs 2,211 crore which were lowest in the past seven quarters. Recovery from NPAs improved to Rs 3,440 crore during the quarter, compared with Rs 537 crore in the same period a year ago.
The ownership of the bank, which is under the Prompt Corrective Action (PCA), has changed from the government of India to LIC. The statement further said Life Insurance Corporation (LIC) completed the acquisition of 51 per cent controlling stake in IDBI Bank on January 21. On the backdrop of capital infusion from LIC, it said that the bank has achieved regulatory capital requirement as on December 31, 2018, and its common equity tier-1 (CET-1) capital improved to 9.32 per cent as on December 31, 2018, against 6.62 per cent a year ago.
IDBI Bank shares on Monday plunged nearly 6 per cent after the company reported widening of loss for the December quarter.
The stock slumped 4.07 per cent to close at Rs 50.65 on the BSE. Intra-day, it tumbled 7.67 per cent. “The bank will be well-positioned to return to a profitable growth path and exit PCA in a time-bound manner, aiding in improvement in its valuation. This is likely to ensure wealth maximisation for all its investors, including LIC and the government, who can realize higher return on their investment,” the bank said.
It proposes to engage the bank as a primary bank for LIC for extending banking services such as deposit and current account facilities and CMS.