IDBI plans expansion; eyes $10b asset book

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IDBI plans expansion; eyes $10b asset book

Dubai - New market forays aimed at doubling its overseas asset book size to $10b

by

Issac John

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Published: Sun 29 May 2016, 7:52 PM

Last updated: Sun 29 May 2016, 11:10 PM

India's IDBI Bank plans to upgrade its branch at Dubai International Financial Centre as a hub for its global operations as it gears up for new market forays aimed at more than doubling its overseas asset book size to $10 billion.
Kishor Kharat, managing director and chief executive officer of the public sector lender, said over the next three years the bank would launch operations in up to 10 new overseas markets, including Saudi Arabia, Qatar and cities in the Far East and Africa.
The Mumbai-based lender, which opened its branch at the DIFC six years ago, has plans to introduce services of its fully owned subsidiary IDBI Capital Market Services, Kharat told Khaleej Times during his recent visit to Dubai.

The DIFC branch, which is catering to foreign currency and trade related requirements of corporate clients, has been recording impressive growth and in six years its asset book has crossed $4 billion, he said. "Our target is to boost it to $10 billion, more than doubling the asset size in three years, as we begin to explore new markets in the coming months."
In India, where the bank recorded losses in the past few quarters along with other public sector banks due to rising non-performing assets, the lender seeks to double its business, rebalance loan portfolio towards micro, small and medium enterprises, agriculture and retail credit, strengthen low-cost deposits and clean the balance sheet of bad loans.
Under the three-year strategic plan, IDBI Bank expects to double its business and rebalance its portfolio so that the share of loans to retail, micro, small and medium enterprises and agriculture segments increases to 41 per cent of total loans in three years from 33 per cent now. Consequently, the share of corporate and infrastructure loans in the total loans will come down to 37 per cent (43 per cent now) and two per cent (24 per cent), respectively, he said.
Kharat hopes to have a turnaround this financial year. "One year down the line we expect to run into profitability. I feel more than 50 per cent of public sector banks, which are currently suffering from stressed assets across infrastructure sectors, will be able to come out of the red."
Recently, IDBI announced that gross NPAs have risen to 10.98 per cent of total loans as compared to 8.94 per cent in the previous quarter. The bank reported a net loss of Rs17. 36 billion for the quarter ended 31 March as provisions rose to account for the increase in bad loans. Selling non-core assets is one way for Kharat to shore up the bank's capital position and strengthen its balance sheet in the short- term. As part of a three-year turnaround plan, the bank plans to raise significant capital by sale of non-core assets and issue of special instruments, he said.
Ruling out any immediate need for recapitalisation, he said even after making provisions for stressed assets and booking losses. IDBI's capital position remains well above the BASEL requirement. "At this juncture, we may not need to recapitalise."
IDBI, which is pressing ahead with a process to sell a minority stake to a financial investor, is also on track to strengthen the operation of its subsidiaries in India and abroad. "Shortly we will initiate the process of launching capital market services in the DIFC. We feel there is big scope for capital market services given the large presence of Indian diaspora in the region."
In line with a three-year strategic business plan, the bank expects to achieve 100 per cent growth in balance sheet size - effectively doubling - with the bottom-line hitting Rs50 billion. "We are also expanding our branch network within India to 4,000 from 1,800 at present and will strengthen employee headcount to 25,000" Kharat said IDBI is working on tie up arrangements with financial institutions in Saudi Arabia and other GCC countries for project based lending. "If we find good business propositions we may go to those markets while keeping Dubai as the hub. Basically, the focus of our global expansion will on the Middle East, Far East and Africa regions.
He said the government, which holds 80.16 per cent stake in IDBI, has initiated a process to sell a minority stake in the bank, which unlike other state-owned banks, is governed by a separate legislation that allows the government to reduce its stake to below 51 per cent without requiring parliament approval.
Investors, including International Finance Corp., the investment arm of the World Bank, and CDC Group, the development finance institution of the UK government, Asian Development Bank, Temasek, CDC Group and TPG Capital are in talks with the government to buy stake in the bank. - issacjohn@khaleejtimes.com


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