The country's youngest public sector lender IDBI Bank today reported a 9.7 per cent

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dip in third quarter earnings to Rs 410 crore on rising bad loans and higher interest expenses.

"We had to take a hit on our post-tax profit due to a one-time provision of Rs 105 crore on account of an aviation account which has become non-performing (the bank has a Rs 700-crore bad loan exposure to Kingfisher Airlines), during the December quarter, which pushed up our gross bad loans to Rs 750 crore," IDBI Chief Financial Officer P Sitaram told PTI in a post-result conference call.

Banks have to make 15 per cent provisioning for the bad loans in the aviation sector under the RBI norms.

However, Sitaram expressed the hope that the bank will be able to maintain its full year earnings at least at the previous fiscal level.

The bank also has nearly Rs 1,000 crore exposure to the troubled national carrier Air India, which is not a substandard asset.

The city-based lender had reported Rs 454 crore profit in the corresponding quarter last year.

A healthy 24 per cent growth in interest income to Rs 584.9 crore was offset by higher interest expenses which jumped 37 per cent to Rs 479 crore during the quarter, the bank said in a filing to the exchanges this evening, which brought down net profit and earnings per share by 10 and 15 percent, respectively.

Another disappointment came from an 11 per cent drop in net interest income during the quarter to Rs 1,059.34 crore from Rs 1,193.27 crore year ago, whereas non-interest income rose to Rs 431.83 crore from Rs 457.96 crore.

The bank's total income rose to Rs 6,281.04 crore, up 22 per cent against Rs 5,159.54 crore in the year-ago quarter.

For the nine month period this fiscal, net profit rose 11 per cent to Rs 1,260.83 crore, compared with Rs 1,134.07 crore, helping the bank announce a Rs 2 per share interim dividend for the year.

Net interest income for April-December rose 5 per cent to Rs 3,333.93 crore from Rs 3,162.48 crore, while non-interest income declined by 8 per cent to Rs 1,341.83 crore from the Rs 1,465.99 crore.

For the first three quarters, IDBI's income rose 24 per cent to Rs 18,632.29 crore from Rs 14,983.82 crore year ago.