IDBI Bank on Friday February 12,2016 reported a loss of Rs 2,184 crore for the December quarter, making it the largest-ever quarterly loss by an Indian bank and casting a shadow over the government's plan to divest up to 26% stake to strategic investors.
IDBI Bank slumped into the red as it was forced to set aside funds to cover for stressed assets turning into bad loans.
The government had planned to reduce its shareholding in IDBI Bank by 20-26% from over 80% levels through a sale to institutional investors and showcase it as a turnaround story on the lines of Axis Bank.
However,that has been forced to postpone the planned institutional placement where it was looking at IFC, LIC and Commonwealth Development Corporation as potential investors. IDBI was seen as a test case for other state-run lenders.
Repeated statements from the government about the proposed sale had resulted in IDBI Bank shares hitting a 52-week high of Rs 96 on the BSE in early December before it began to slump, prompting the management to consider postponing the QIP. The bank's share was trading at over Rs 90 on the BSE when the government subscribed to fresh capital at the end of December. IDBI had issued shares at Rs 75 to the government when it raised Rs 2,229 crore. The shares began to fall after the news broke out that the RBI was insisted on strict provisioning. On Friday, the stock closed 0.2% lower at Rs 52.
IDBI Bank reported a loss of Rs 2,184 crore for October-December 2015, compared to a profit of Rs 108 crore a year ago. Its profits were dented due to provisions of Rs 3,722 crore, most of which was toward bad loans. Provisions in the corresponding quarter last year were Rs 972 crore. Gross non-performing assets soared 61% to Rs 19,615 crore. The damage due to bad loans has been severe for IDBI because its loan book comprises large advances to corporates thanks to its legacy of a development finance institution. As a percentage of assets, the bank's gross NPAs increased to 8.94% from 5.94% earlier.
IDBI Bank's MD & CEO Kishore Kharat said losses were due to the asset quality review (AQR) conducted by the RBI. "The RBI has advised the bank to revise asset classification in respect of certain advances over this quarter and the next quarter. We have also done some accelerated provisioning on our own," said Kharat. He added that the pain could be a little less in the last quarter. Earlier in the day, IDBI Bank had announced that it would raise up to $500 million through tier-I bonds.
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