Rising cost of deposits and provisions for restructured loans and bad loans led IDBI Bank and Central Bank of India to report a drop in net profit for third quarter ended December 2011.
IDBI Bank’s net profit dipped to Rs 410 crore in third quarter from Rs 454 crore in October-December 2010. Its chief financial officer P Sitaram said an increase in costs of funds and reversal of interest on restructured loans and non-performing assets shrunk net interest income. Its net interest margin declined to about 1.89 per cent.
Central Bank of India’s net profit nosedived to Rs 113 crore in third quarter of FY 2011-12 from Rs 404 crore in third quarter of 2010-11. M V Tanksale, its chairman and managing director, said, “higher provisions for NPAs and restructured assets led to dip in net profits.”
The provisions rose to Rs 486.36 crore from Rs 189.93 crore.
Bank expects to control cost of funds by hiking share of low costs deposits — savings and current accounts — to 24 per cent by the end of March 2012, according to IDBI executive director R K Bansal.
IDBI’s fee-based income rose marginally to Rs 361 crore in third quarter of FY12 from Rs 358 crore in same period a year ago. Its provisions stood at Rs 406.44 crore as against Rs 651.9 crore.
Both public-sector lenders have treated account of ailing private carrier Kingfisher as NPA’s. While IDBI Bank made provision of just about Rs 100 crore, Central Bank set aside about Rs 60 crore. Officials of both bankS said if the company makes the interest, payment account could get upgraded as standard asset.