Why IDBI Bank share rose 17% in early trade

Share of IDBI Bank opened 17 per cent higher at Rs 44.80 on the Bombay Stock Exchange after Reserve Bank of India (RBI) removed the lender from the prompt corrective action framework, subject to certain conditions and continuous monitoring. The stock of IDBI Bank has rallied 54 per cent in last one month and 156 per cent from its 52-week low of Rs 17.5, touched on March 13, 2020.

On Friday, IDBI Bank share price opened 17.36 per cent higher at Rs 44.80 against previous close price of Rs 38.25 on strong volumes. As many as 59.56 lakh shares changed hands as compared to two-week average volume of 40.7 lakh shares. Market cap of the stock surged to Rs 46,181 crore. Meanwhile, Sensex was trading 423 points or 0.83 per cent higher at 51,703.

On the National Stock Exchange, IDBI Bank shares were trading at 43.10, up 12.68 per cent against previous close of Rs 38.25. In opening deals, the stock hit high of Rs 45 and low of Rs 42.

IDBI Bank was removed from the RBI's prompt corrective action (PCA) framework on Wednesday after a gap of nearly four years on improved financial performance. "Taking all the above into consideration, it has been decided that IDBI Bank Limited be taken out of the PCA framework, subject to certain conditions and continuous monitoring," the RBI said.

LIC-owned IDBI Bank was placed under prompt corrective action (PCA) framework in May 2017 after it had breached the threshold for capital adequacy, asset quality (net NPAs was over 13 per cent in March 2017), return on assets and the leverage ratio.

The decision was taken after review of performance of IDBI Bank by the Board for Financial Supervision (BFS) in its meeting held on February 18, 2021. It was observed that the bank's net NPA and leverage ratio did not breach the PCA parameters during the quarter ending December 31, 2020.

IDBI Bank reported a net profit of Rs 378 crore for December quarter of 2020-21 on the back of healthy growth in interest income. It had reported a standalone net loss of Rs 5,763 crore in the year-ago quarter. Net interest income (NII) grew 18 per cent to Rs 1,810 crore as against Rs 1,532 crore in the same quarter of the previous fiscal. Its net interest margin (NIM) improved by 60 basis points to 2.87 per cent as compared to 2.27 per cent in the year-ago period. Gross NPA ratio declined to 23.52 per cent from 28.72 per cent in the third quarter of the previous fiscal. Net NPAs eased to 1.94 per cent as against 5.25 per cent.

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