Small-sized private sector lender IDFC First Bank Tuesday reported a net loss of Rs 1,538 crore in the quarter to December, mainly on account of a one-time exceptional item. Capital First and IDFC Bank completed the merger in December 2018 and this is the maiden earnings of the merged entity and thus the numbers are not comparable.
The management attributed the high loss to amortization of Rs 2,600 crore worth of intangibles, mainly goodwill, arising out of the merger move. "This quarter was unique because of the merger. There were certain intangible assets, mainly goodwill, valued at Rs 2,600 crore that arose in the books of the combined entity.
"As a prudent measure, we decided to accelerate the amortization of the intangible assets to the profit and loss accountm leading to a net loss of Rs 1,538 crore," managing director and chief executive V Vaidyanathan told reporters. As per Section 59 of the Banking Regulations Act, banks are restricted from declaring dividends even if the bank carries intangible assets such as goodwill, and hence the board decided to better charge it off to the profit and loss account, he explained further and added that all merger- related expenses have been completed by this quarter.
The bank reported a net interest income of Rs 1,145 crore in the reporting period and a net interest margin which improved to 3.27 percent, due to the addition of the retail book through its merger with Capital First. The bank has internally set a margin target of 5-5.5 percent for the next five to six years, Vaidyanathan said.
Gross NPAs stood 1.97 percent and net NPA at 0.95 percent while the provision coverage ratio stood at 72.9. Total capital adequacy ratio as per Basel III guidelines, was at 16.51, of which tier I was at 16.14.
Total deposits rose to Rs 61,914 crore, out of which Casa deposits stood at Rs 6,421 crore, contributing 10.37 percent of the total deposits and 4.92 percent to the total borrowing and deposits. Total time deposits stood at Rs 33,182 crore of which retail time deposits stood at Rs 7,605 crore. "Our strategy will be to predominantly build a retail bank. Over the next five years, we want 70 percent of the loan book to be retail," Vaidyanathan.
Its scrip ended at Rs 42.80, down 1.38 percent on the BSE, while the bench closed up a tad in a choppy trade..