IDBI turned the corner for the quarter ended March, after a long streak of losses. The stock market is delighted by the performance, and has pushed the shares 20 percent higher to Rs 24.25 per share. There only buyers for the stock at this point.
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Here are the key takeaways from the performance:
Net interest income, the surprise package:
The improvement in NII, which is the difference between interest earned on loans and interest paid out to depositors, improved significantly. This was driven mainly by a steep fall in interest expenses as a big chunk of high cost deposits may have either matured or been withdrawn. The figure also benefited from a tax reversal which is estimated between Rs 300-340 crore.
Net interest margin: The decrease in high cost deposits also boosted the net interest margin of the bank by over 150 basis points.
Business momentum: The strong quarterly performance notwithstanding, business momentum has been soft. The trend in deposit growth as well as loan growth was nothing to write about. On the positive side, the bank’s share of low cost deposits has improved.
Asset quality: Slippages of the bank declined sharply, pulling up both the gross and net non-performing asset ratios. The key challenge will be to sustain that, given the financial destruction in the economy from the COVID pandemic. The bank has the highest provision coverage ratio in the banking sector at 93.74 percent. Provision coverage is a term used to determine how much money is being set aside for gross NPAs.
Net profit: The bank has posted a quarterly net profit for the first time in three-and-a-half years.
Had offered moratorium to all our borrowers, some have opted out.
68% of our retail borrowers have availed of the moratorium.
69% of our corporate borrowers have availed of the moratorium.
51% of our mid-corporate segment have availed of the moratorium.
Expect the IDBI Federal Life deal to be closed by September this year.
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