Propelled by a robust jump in net interest income, IDBI Bank's net profit increased by 69 per cent to Rs 429 crore in the second quarter ended September 30, 2010, compared with Rs 254 crore in the corresponding quarter last year.
Net interest income (interest earned less interest paid) shot up by 152 per cent in the reporting quarter to Rs 1,168 crore (Rs 464 crore in Q2 FY10).
Non-interest income, however, was down by 14 per cent at Rs 492 crore (Rs 571 crore), as profit on sale of investments was lower at Rs 20 crore (Rs 167 crore).
Sequentially, the bank reported de-growth in credit from Rs 1,35,329 crore as of June-end 2010, against Rs 1,30,213 crore as of September-end 2010. Similarly, deposits declined by 2 per cent from Rs 1,57,204 crore to Rs 1,54,305 crore.
According to Mr R.M. Malla, Chairman and Managing Director, IDBI Bank, the credit de-growth is on account of the bank not renewing low-yielding short-term loans. Deposits also declined as high cost short-term bulk deposits were not renewed.
Cost of deposits
In the reporting quarter, cost of deposits improved to 6.65 per cent (7.45 per cent in Q2 FY10) and net interest margin more than doubled to 2.27 per cent (1.05 per cent).
Meanwhile, the bank has written to the Government to be allowed to float long-term infrastructure bonds.
With an outstanding exposure of Rs 30,000 crore to the infrastructure sector, Mr Malla said IDBI Bank is the “first port of call” for all infrastructure project developers. Hence, the bank hopes to get the Government's nod to float the bonds that entitle a tax payer exemption on money (Rs 20,000) invested under Section 80CCF of the Income-Tax Act.
The public sector bank is also planning to take refinance from refinancing institutions such as Nabard, SIDBI, Exim Bank, NHB, and IIFCL. Given the current tight liquidity situation and rising interest rates, refinance from these institutions will work out cheaper.
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