IDBI spared NPA blushes
IDBI Bank saw its net loss widening to Rs 5,763.04 crore for the quarter ended December 31, 2019, from Rs 4,185.48 crore because of a higher tax outgo. However, the lender reported better asset quality with provisions for bad loans showing a drop and non-performing assets (NPAs) falling on a sequential basis.
The lender said that during the quarter, it exercised the option of a lower tax rate because of which it had to take a one-time hit of Rs 6,273 crore.
“The bank has exercised the option of lower tax rate permitted under section 115BAA of the Income Tax Act, 1961, as introduced by the Taxation Laws (Amendment) Act, 2019. Accordingly, the bank has re-measured its net deferred tax assets (DTA) recognised till September 30, 2019, based on the tax rate prescribed in the said section, resulting in a one-time reversal of Rs 6,273.04 crore,” IDBI Bank said in its notes to accounts.
According to the bank, if one were to exclude the impact of this one-time additional hit, it would have reported a net profit of Rs 418 crore against a net loss of Rs 5,763 crore reported for the third quarter.
There was good news on the asset quality front as gross NPAs in absolute terms fell to Rs 49,502.68 crore from Rs 52,052.78 crore in the preceding quarter.
Moreover, the percentage of gross NPAs declined to 28.72 per cent from 29.67 per cent in the second quarter of the fiscal and 29.67 per cent as on December 31, 2018. Provisions for bad loans also dropped significantly to Rs 440 crore from Rs 3,545 crore in the preceding three months.
Notwithstanding the higher loss, the improvement in asset quality should come as good news for the government, which is planning to divest its residual stake in the bank. While announcing the 2020-21 budget, finance minister Nirmala Sitharaman had said that the balance holding of the Centre in IDBI Bank will be sold to private, retail and institutional investors through the stock exchange.
For the quarter ended December 31, 2019, while the government held 47.11 per cent through 4,88,98,71,903 shares, the Life Insurance Corporation (LIC), which is the bank’s largest shareholder, had a stake of 51 per cent.
The finance minister had also announced that it will divest part of its stake in LIC through an IPO.
While the third quarter numbers were announced after market hours, the IDBI Bank settled with a gain of over 2 per cent at Rs 37 on the BSE on Tuesday.