Q1 Review: IDBI Bank's June Quarter Profit Rises 61.9% (YoY)
#Q1WithBQ | IDBI Bank's June quarter asset quality position improves.
MD & CEO Rakesh Sharma shares his outlook for the coming quarters. #BQLive
MD & CEO Rakesh Sharma shares his outlook for the coming quarters. #BQLive
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NewsTranscript
00:00 Hello and welcome to BQ Prime. We are joined with Sir Rakesh Sharma, the MD and CEO of
00:04 IDBI Bank. Sir, you have announced your first quarter results. I just wanted to get a sense
00:09 as to what the 62% net profit, what does it show?
00:14 The bank has shown overall improvement in all the parameters and the core profitability
00:20 is improving. We have been able to improve our deposits, CASA ratio, although percentage
00:26 wise slightly it has come down but still continues to be around 52% and we have shown 19% growth
00:33 in advances also. There have been good recoveries. This quarter we were able to make 1628 crore
00:39 of recovery also and overall the operations there is improvement which has resulted in
00:47 this profit. So as a result we have been able to show improvement in ROE also and the net
00:54 interest margin has also improved substantially.
00:58 Sir, your net interest margin of 5.8% is probably industry leading at this stage. How long do
01:05 you think this high NIM can continue for IDBI Bank?
01:10 I would like to clarify that this quarter we had one good recovery and this was around
01:16 1000 crore recovery which was credited to interest account. Partly it has contributed
01:22 towards this high margin. Normally our net interest margin last year also June 22 it
01:29 was 3.73. If we exclude that part then also the net interest margin is 3.94 and we are
01:36 quite comfortable with that. So our target is that the NIM should be maintained above
01:42 3.50 and which we are quite sure that we will be able to maintain it because of course the
01:50 deposit cost with the increase in the interest rates some lag impact was there so it has
01:55 come in this quarter. Maybe in the coming quarter also some cost of deposit may increase
02:01 but we are quite sure that we will be able to maintain the net interest margin above
02:05 3.5%.
02:06 Okay, I will come to the advances in deposits growth. Now you have shown about 20% overall
02:12 advances growth. Retail is growing fast but corporate seems to be growing faster than
02:16 that. So I just want to get a sense as to what the dynamics are and what is actually
02:19 contributing to your asset growth.
02:23 As I said overall first during when we were under PCA we were not growing in corporate
02:28 and as a result some of the corporates had left us. So what is our efforts are not only
02:37 to bring back them to our books but also book some new accounts, good accounts. So that
02:43 is why on a low base the corporate book has shown very good improvement. But overall in
02:50 the retail has also grown. It has grown by our structured retail assets have grown by
02:55 around 13% and overall retail has grown by 11%. So there is overall improvement as I
03:02 said and the corporate retail ratio presently corporate is only 31%. Our board approved
03:11 policies says that we can go up to 35%. So overall with this improvement I think we will
03:16 be able to maintain that ratio.
03:17 So there is still some headroom on the corporate side you are saying. But in corporate what
03:21 do you want because IDBI is historically known to be a development finance institution. I
03:25 mean that is what it was before it became a bank. But do you want to do project finance
03:29 still going ahead?
03:31 First of all I like to clarify that you know about two years back when the government had
03:37 made some made that amendment now IDBI does not you know is will not be doing development
03:44 banking. So that class has been removed. So but of course in corporate we do some project
03:50 funding also. Earlier you know because we were a development finance institution we
03:56 were our concentration was more on infrastructure, power and roads and all these things. But
04:02 now slowly we are not very aggressive on that. But yes we are growing in that good company.
04:08 The major main thing is that the company credentials should be good, the rating should be A and
04:14 above and with that manufacturing some and BFC also growth is there. So overall as I
04:20 said it is a quite diversified growth which has taken place.
04:24 Okay fair enough. I also wanted to touch on the PCR. Now you are at 98.99 you know including
04:30 the written off accounts. But that seems to be the peak at which any bank could possibly
04:34 reach. Nobody is going to do 100% you know PCR. But I just wanted to understand what
04:40 is the strategy and how do you think these provisions can be written back in the future?
04:44 No one is that you know even including technical write off it is 99%. But if we exclude technical
04:51 write off then also provision coverage ratio is around 92%. So that provisions have been
04:58 high. So but I had mentioned earlier that you know whether the account is in technical
05:04 write off or in the live account. So our recovery of you know efforts there is no difference.
05:13 So both ways our department and PA management group and credit monitoring group both they
05:19 continue with their efforts for recovery. And this you know with the provision coverage
05:25 ratio being high whenever we are able to recover mostly it is going to the profit either way
05:31 of you know going to other income provision reversal or interest income as it has happened
05:35 in the current quarter. So that will improve the profitability part. So you know 99% having
05:40 provision it is a sort of you know strong balance sheet hidden profit for us.
05:46 I want to close this interview off with one question around the divestment. Now you know
05:50 I we all know that the government and LIC will divest some stake in IDBI bank. Talk
05:56 there have been a lot of stories with respect to this person being interested and that person
06:00 being interested. But as far as the bank is concerned has anything changed on your front?
06:04 Has any extra information come to you?
06:07 No one thing has changed of course that our performance has improved. And I think about
06:13 three years back I had also I had indicated that my mandate is that I have to improve
06:18 the performance of the bank. Remaining disinvestment part the owners will be able to will be managing.
06:25 LIC is the owner, Government of India is the owner and as Government of India department
06:30 Deepam is handling that. We do not have much say in that. My focus is to improve the performance
06:35 of the bank so that the shareholders or you know my stakeholder they get good value for
06:40 money.
06:41 All right thank you so much Mr. Sharma for joining us on this conversation.
06:50 [BLANK_AUDIO]