IDBI Bank (IDBI) Q4 03/04 earnings summary

Executive summary

• The accounting period covered 18 months, April 2003–September 2004, to align with the October 1, 2004 conversion to a banking company; results are not comparable with the prior 12-month year.

• Development finance remained a core function after conversion, alongside a planned full range of banking activities; the proposed IDBI Bank merger had board approval, with statutory steps still pending.

• Government-backed SASF acquired Rs.9,000 crore of stressed assets in exchange for non-interest-bearing special securities, supporting asset-quality improvement.

Financial highlights

• 18-month total income after provisions was Rs.8,223.3 crore; total expenses were Rs.7,761.8 crore and PBT was Rs.461.5 crore.

• PAT was Rs.465.0 crore, including a Rs.70.3 crore deferred tax credit; prior-year PAT was Rs.401.4 crore and included a Rs.38.2 crore deferred tax credit.

• Gross income was Rs.9,915 crore and provisions/write-offs were Rs.1,692 crore; annualized net income declined ~14% YoY, mainly from lower loan yields and a smaller loan portfolio.

• An additional Rs.1,500 crore accelerated provision was made from reserves for potential deficiencies in pre-conversion loan values.

• A 15% dividend on equity capital was recommended; EPS was Rs.7.12 for 18 months, or Rs.4.75 annualized.

Outlook and guidance

• Real GDP growth was projected at 6.0%–6.5% for FY04/05, with rising international oil prices and inflation identified as potential drags.

• Manufacturing and infrastructure investment were expected to support credit demand; steel, cement, autos, pharmaceuticals and IT were highlighted as industries likely to perform better.

• Higher credit demand and industrial growth could put upward pressure on interest rates over the medium term; oil prices and US rate rises could pressure the rupee.

• Banking conversion and SASF support were expected to expand retail and corporate participation and improve earnings from recovering core sectors.