Tale of two banks IDBI loss widens as BoB returns to profit

Tags: Banking
State-owned banks presented a mixed picture in their quarterly results on Thursday, with IDBI Bank reporting a steep rise in losses and Bank of Baroda and United Bank of India returning to profit from losses last year.

IDBI Bank said its net loss widened to Rs 3,200 crore in the March 2017 quarter as it made higher provisions to account for a spike in bad loans. The lender had posted a net loss of Rs 1,736 crore in the same quarter of last year.

Operating profit in the quarter too declined to Rs 1,390 crore, from Rs 1,595 crore a year before. However, net interest income jumped 14.43 per cent to Rs 1,633 crore for the quarter against Rs 1,427.24 crore in the same quarter last year. Net interest margin increased by 8 basis points from 1.67 per cent as on March 2016 to 1.75 per cent as on March 2017.

Provisions for NPAs zoomed to Rs 5,333 crore from Rs 185 crore a year ago. The provision coverage ratio was at 54.96 per cent.

Asset quality worsened with gross non-performing assets (NPAs) hitting 21.25 per cent of gross advances at the end of March compared to 10.98 per cent in the same quarter of last year.

Cost of funds has been reduced by 64 basis points from 6.82 per cent to 6.18 per cent. Advances fell to Rs 1,90,826 crore from Rs 2,15,893 crore.

The shares of IDBI Bank closed at Rs 70, down 7.77 per cent from its previous close of 75.90 as the results disappointed investors.

The RBI has already put IDBI under a prompt corrective action (PCA) regime, in view of its worsening bad loans and negative return on assets.

As troubles mounted for IDBI Bank, peer Bank of Baroda has bounded back into the black, reporting a profit after tax of Rs 155 crore for March 17 quarter, led by healthy business growth. The bank had reported a net loss of Rs 3,230 crore in the same period last year.

"The profit in this quarter is largely the organic business that grows. There was growth in the fee income and also due to some interest on treasury related income tax refund. Fundamentally it was business as usual for us," managing director and CEO P S Jayakumar said.

The net interest margin (NIM) for domestic operations stood at 2.5 per cent, while global margin stood at 1.8 per cent. Total NIM in the fourth quarter was at 2.17 against 2.06 a year ago. Gross NPAs stood at 10.46 per cent while net NPAs were at 4.72 per cent.

The gross NPA stands at Rs 42,719 crore for March 2017. The bank reported a disclosure in divergence of Rs 295 crore in gross NPAs. "For a lot of that accounts we had taken additional provisions," Jayakumar said.

United Bank, too, reported a profit as its provision for bad loans declined. Its March 2017 quarter profit stood at Rs 73.56 crore against a loss of Rs 413.04 crore in the year-ago period.

Total income sttod at Rs 2,672.88 crore versus Rs 2,752.35 crore. Provisions fell to Rs 42.48 crore from Rs 292.07 crore, as gross NPA ratio rose to 15.53 per cent from 13.26 per cent.

For 2016-17, it posted a net profit of Rs 219.51 crore against a loss of Rs 281.96 crore. Total income rose to Rs 11,614.53 crore from Rs 11,404.20 crore.

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