India's IDBI Bank expects gross bad loan ratio ease to single digits

By Siddhi Nayak

MUMBAI (Reuters) -State-run IDBI Bank Ltd expects to lower its gross bad loan ratio to single digits by the end of this year on strong loan recoveries, a senior executive said on Monday, after the bank reported a record third-quarter profit.

IDBI Bank's profit rose 60% to a 9.27 billion rupees ($113.84 million) for the quarter ended Dec. 31 on lower bad loan provisions, while net interest margin, a measure of profitability, also climbed.

The Mumbai-based bank, which had some of the worst asset quality among lenders during India's bad loan crisis, has seen soured loans drop dramatically over the past few quarters on strong recoveries, and is now the focus of a government move to monetise a majority stake.

"We expect gross non performing assets (NPA) ratio to be gradually brought down to single digits with a recovery target of 40 billion rupees ($491.32 million) for this financial year. Our net NPA level will be maintained below 1.25%," Chief Executive Officer Rakesh Sharma told reporters in Mumbai.

Net interest margin rose to 4.59% for the reported quarter from 3.88% a year ago, while net advances jumped 17% to 1.5 trillion rupees.

Its gross bad loans as a measure of total loans — a key measure of asset quality — improved to 13.82% in the quarter ended Dec. 31, from 16.51% in the previous quarter.

Indian lenders have performed well as demand for credit rebounded from pandemic lows and boosted loan growth with a revival in the economy. Banks have in turn had to jostle for a larger share of deposits.

IDBI said growth in deposits had not met its expectations, and trimmed its guidance for fiscal year growth to 8%-10% from 10%-12% earlier.

Deposits in the December quarter grew 5% year-on-year.

The Mumbai-based bank also expects core net interest margin for fiscal year 2023 in the range of 3.75% to 4%, it said.

($1 = 81.4140 Indian rupees)

(Reporting by Varun Vyas and Nandan Mandayam in Bengaluru, writing by Chris Thomas; Editing by Nivedita Bhattacharjee and Eileen Soreng)