Divestment candidate IDBI Bank‘s second-quarter net profit rose 46% to Rs 828 crore on strong loan growth and higher margins amid a marked improvement in asset quality. In the same period last year, the net profit was Rs 567 crore.

The bank’s loan book rose 17% to Rs 1.46 lakh crore on growth in the retail and corporate sectors. Net interest income (NII) rose 48% to Rs 2,738 crore from Rs 1,854 crore a year ago.

Lower funding costs helped boost profit margins due to higher current and savings account deposit ratios and lower bulk deposits. In September 2022, the cost of capital fell 16 basis points to 3.72% from 3.88% a year ago. A basis point is 0.01 percentage points.

Strong loan growth and lower funding costs helped push the net interest margin (NIM) to 4.37% from 3.02% at the end of September last year. Chief executive Rakesh Sharma said the bank expects its fiscal net interest margin to remain above 3.25%, while strong loan growth means advances may now grow at a faster 15%, compared to the bank’s original forecast of 10% to 12% of the fiscal.

IDBI Bank is expected to maintain its retail and corporate balances at 60:40. It also earmarked Rs 11,000 crore of non-performing assets (NPAs) to be sold to the National Asset Restructuring Corporation (NARCL), which will increase gross non-performing assets as a percentage of loans to 12% from 16.51% at end-September. The bank’s provision coverage ratio is close to 98%.