IDBI Bank on Monday reported a 35% year-on-year (y-o-y) increase in its net profit to Rs 690.6 crore for the quarter ended March, driven by a 72% decline in provisions to Rs 669 crore.

The private lender’s pre-provisioning operating profit fell 46% y-o-y to Rs 1,513 crore. The management attributed the deterioration in the metric to the effect of a higher base on account of a one-off income tax refund in Q4FY21. The net interest margin (NIM), a key measure of profitability, stood at 3.97%, up 9 basis points (bps) sequentially.

The NII, or the difference between interest earned and interest expended, fell 25% y-o-y to Rs 2,421 crore. Rakesh Sharma, MD & CEO, said this was a result of the overhang of the prompt corrective action (PCA) framework, which the lender exited only in March 2021. “Almost four years we were under PCA and the balance sheet was de-growing. Our growth mainly started in the second half of FY22,” Sharma said. “Throughout the next year, we will be getting the benefit of the increased business and we are quite hopeful that income will improve.”

Gross advances grew 10% y-o-y to Rs 1.78 trillion at the end of March. Retail loans accounted for 63% of the total loan book, with the rest being corporate loans. IDBI Bank has guided for a 10-12% loan growth in FY23.

The bank’s total deposits rose 1% y-o-y to Rs 2.33 trillion at the end of the reviewed quarter. The share of current accounts savings accounts (CASA) in total deposits improved to 56.77% as on March 31, 2022, compared with 50.44% in the year-ago period.

The asset quality improved, with the gross non-performing asset (NPA) ratio falling to 19.14% in Q4 from 20.56% in the previous quarter. The net NPA ratio fell to 1.27% in the March quarter from 1.7% in the December quarter.

Sharma said the bank’s gross bad loan ratio remains high due to delays in transferring assets to National Asset Reconstruction Company and its decision to avoid making technical write-offs. “We are not doing technical write-offs due to tax purposes. Otherwise, if we do technical write-offs of our 100% provided accounts, our GNPAs will come down to less than 2%.”

Slippages amounted to Rs 908 crore, down from Rs 1,840 crore in the previous quarter. The bank is targeting a gross NPA ratio of less than 14% by March 2023 and under 10% by March 2024.

Shares of IDBI Bank ended at Rs 45.50 on the BSE on Monday, up 0.33% from their previous close.