IDBI Bank returns to profit in Q4FY20

State owned lender IDBI Bank has returned to profit in fiscal fourth quarter to March 2020, ending its thirteen straight quarter of loss.

On Saturday reported a net profit of Rs 135 crore in the quarter ended March as against a loss of Rs 4,918 crore for Q4FY19.

However, net loss for the entire fiscal year 2019-20 stood at Rs 12,887 crore against a loss of Rs 15,116 crore in FY19.

For the first time, the lenders’ NPAs reduced to Rs 727 crore in Q4-2020 from the Rs 1,781 crore in Q4-2019. The profit would have been higher but for the recoveries which were adversely affected during March due to COVID-19 impact.

As on March 31, the bank had made Covid-19 related provisions of Rs 247 crore in Q4 FY20 against standard assets.

The gross non-performing asset (NPA) ratio stood at 27.53% as against 27.47% as on March 31 last year and 28.72% as on December 31.

The net NPA ratio improved to 4.19% as on March 31 against 10.11% as on March 31 and 5.25% as on December 31.

During the financial year, IDBI Bank raised capital funds of Rs 745 crore through issue of Basel III compliant tier 2 bonds. The amount mobilised will be counted as part of tier 2 capital and enhance the bank’s capital adequacy.

In September last year, the government had approved Rs 9,300 crore capital infusion into IDBI Bank to increase the lender’s capital base.

Life Insurance Corporation (LIC), which has a controlling stake in IDBI, infused Rs 4,743 crore while the government provided Rs 4,557 crore as one-time re-capitalisation.

All parameters have shown improvement. Net NPAs have also come down and aging provisions are evenly spread so that there is no extra burden.

Tier 1 capital and capital adequacy ratio (CAR), which was at 10.57% and 13.31% respectively as on March 31, 2020, have improved as against 9.14% and 11.58% as on March 31, 2019.

The bank achieved all PCA parameters for exit, except RoA.

Net net this performance by the bank in Q4FY20 looks commendable but Q1FY21 is likely to be tough and it remains to be seem as to how the bank manages this difficult period ahead in FY21.

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