With the incremental one time specific provisions created in Q2FY2016, the outstanding provisions as percentage of gross loan book more than doubled to 9.6% at end September 2015 from 4.5% a quarter ago and 3.3% a year ago.

However, the loan book of the bank dipped sharply, while margins also deteriorated in Q2FY2016. Average spreads declined to 1.3% in the year ended September 2015 from 2.1% in the year ended September 2015, while NIM eased to 3.1% from 3.8%. The operating expenses jumped 52% in Q2FY2016 over Q2FY2015, as the company continues to spend on banking venture. Bank expenses were at Rs 244 crore in H1FY16 (Rs 38 crore in H1FY15)

The total income from operations rose 1% to Rs 2512.9 crore for the quarter ended September 2015, while interest expenses increased 5% to Rs 1451.56 crore. Other expenses moved up 52% to Rs 292.0 crore. The operating profits declined 15% to Rs 769.34 crore in Q2FY2016.

Provisions and contingencies declined 7% to Rs 262.15 crore in Q2FY2016 from Rs 281.18 crore in Q2FY2015. Depreciation provisions increased 37% to Rs 8.78 crore in Q2FY2016. After exceptional item of Rs 2638.72 crore, the company recorded losses before taxes of Rs 2140.31 crore in the quarter ended September 2015. Tax write-back stood at Rs 695.2 crore in Q2FY2016, helping to contain net losses at Rs 1468.83 crore for Q2FY2016.

Net Interest Income (NII) declined 5% to Rs 615 crore in Q2FY2016 over Q2FY2015. NII from loans dipped 23% to Rs 432 crore, while the NII from treasury operations doubled to Rs 183 crore in the quarter ended September 2015. The strong growth in treasury NII was driven by 40% surge in treasury book to Rs 25115 crore at end September 2015 over September 2014.

Non-interest Income declined 2% yoy to Rs 439 crore in Q2FY2016. Principal investments income increased 1% to Rs 288 crore in Q2FY2016. Asset management income improved 6% to Rs 113 crore, while fixed income rose 40% to Rs 7 crore. Other income was flat at Rs 4 crore in Q2FY2016, while loan related fees declined 52% to Rs 13 crore, and investment banking and broking fees also slipped 25% to Rs 18 crore in Q2FY2016.

• The balance sheet declined 3% from Rs 79259 crore at end September 2014 to Rs 76715 crore at end September 2015.
• Gross Loan book dipped 15% from Rs 54851 crore as on September 2014 to Rs 46889 crore as on September 2015.
• Gross Approvals fell 5% from Rs 10351 crore in H1FY15 to Rs 9807 crore in H1FY16.
• Gross Disbursements plunged 20% from Rs 6678 crore in H1FY15 to Rs 5353 crore in H1FY16.
• Provisions were Rs 2963 crore in H1FY16.
• One time provision of Rs 2500 crore by utilizing non©\distributable statutory reserves.
• Rs 138 crore towards reversal of unrealized income for stressed assets.
• Regular provisions were at Rs 325 crore in H1FY16. (Rs 485 crore in H1FY15)
• Average spreads for rolling 12 month period ending September 2015 - 1.3% (FY15 ¨C 1.8%)
• NIMs for rolling 12 month ending September 2015 - 3.1% (FY15 - 3.4%)
• Capital Adequacy at 11.2% as on 30 September 2015.
• Average Assets under management - Rs 70223 crore

IDFC Bank

IDFC Bank was launched on 01 October 2015. Key metrics with respect to IDFC Bank:

• Balance sheet size of Rs 73,447 crore
• Networth of Rs 13,322 crore
• Book value on Demerger of Rs 39.11 per share
• 23 branches launched of these 15 are rural branches in Hoshangabad, Khandwa and Harda districts of Madhya Pradesh. The 8 urban branches are in 4 metros and Pune, Ahmedabad, Hyderabad and Bengaluru.

Asset Quality

GNPA ratio more than doubled on qoq basis to 3.17% at end September 2015. Meanwhile, the NNPA ratio was maintained flat 1% at end September 2015. However, the restructured loans halved to 3.7% of loan book at end September 2015 from 7% at end June 2015, while also dipped from 6.1% at end September 2014.

The overall stressed asset (NNPA + Restructured Loans) of the company plunged to 4.7% of loan book at end September 2015 from 8% at end June 2015 and 6.5% from end September 2014

Book value of the company stood at Rs 100.9 per share, while the adjusted book net of NNPA and 10% of restructured advances stood at Rs 96.9 per share at September 2015.

Half Yearly Financial Performance

Total Income grew 1% yoy to Rs 4739.67 crore in the half year ended September 2015 (H1FY2016). Interest expenses increased 11% to Rs 2970.98 crore and the other expenses increased 62% to Rs 527.55 crore in H1FY2016. Operating profits declined 25% to Rs 1241.14 crore in H1FY2016. Provisions and contingencies declined 33% to Rs 324.61 crore. After considering exceptional item of Rs 2638.72 crore, the losses before taxes came in at Rs 1737.75 crore. Tax Provisions write back stood at Rs 566.23 crore in H1FY2016. Finally, the net losses stood at Rs 1214.62 crore in H1FY2016.

Net Interest Income (NII) declined 7% to Rs 1241 crore. NII from loans declined 20% to Rs 938 crore, while NII from treasury operations increased 92% to Rs 304 crore in H1FY2016.

Non-Interest Income fell 11% to Rs 519 crore, as the income from principal investments declined 8% to Rs 255 crore. Fees from IDFC's asset management business moved up 11% to Rs 227 crore in H1FY2016, but income from Investment banking and broking declined 8% to Rs 37crore. Loan related fees were flat at Rs 35 crore in H1FY2016, while fixed income segment recorded losses of Rs 35 crore in H1FY2016.

• Pursuant to the application made by the Holding Company, the Reserve Bank of India ("RBI") has granted its approval to utilize the balance in the Statutory Reserves to create specific provision against identified stressed assets. Accordingly, the Holding Company has created specific provisions of Rs 2500 crore on such assets in H1FY2016. This one time provision along with reversal of unrealized interest on stressed assets of Rs 138.72 crore have been charged to the Statement of Profit and Loss and classified as exceptional item.
• In accordance with the RBI approval, an amount equivalent to Rs 1634.80 crore (Provision of Rs 2500 crore net of deferred tax asset of Rs 865.20 crore) is transferred from the non-distributable Statutory Reserve to the balance of the Surplus in Statement of Profit and Loss in Reserves & surplus.
• During the quarter and half year ended September 30, 2015, the Company has invested Rs 8784.95 crore as equity in its regulated wholly owned subsidiary, IDFC Financial Holding Company Limited ("IDFC FHCL"), in compliance with the RBI Guidelines on Licensing of New Banks in the Private Sector dated 22 February 2013.
• Further, as per the guidelines, IDFC FHCL should hold investment in IDFC Bank Limited and all other regulated financial service entities of IDFC Group. Accordingly, during the quarter and half year ended September 30, 2015, IDFC Limited has transferred its entire investments in all regulated subsidiaries, i.e. IDFC Alternatives Limited, IDFC Asset Management Company Limited, IDFC AMC Trustee Company Limited, IDFC Infra Debt Fund Limited, IDFC Securities Limited & IDFC Trustee Company Limited to its wholly owned subsidiary, IDFC FHCL for consideration received in cash.
• In addition, IDFC Finance Limited has surrendered its NBFC License and the Holding Company has transferred its entire investments in IDFC Finance Limited to its wholly owned subsidiary, IDFC Projects Limited.
• Pursuant to filing of the Scheme of Arrangement under Section 391-394 of the Companies Act, 1956, the Hon'ble Madas High Court has vide its order dated June 25, 2015, approved the Scheme of Arrangement between IDFC Limited and IDFC Bank Limited and their respective shareholders and creditors. On fulfillment of all conditions specified under the Scheme of Arrangement and on receipt of final Banking Licence for IDFC Bank Limited along with other necessary approvals required for commencement of banking operations, the demerger has been recorded with effective date of 01 October 2015.
• Accordingly, assets amounting to Rs 66237.46 crore and liabilities amounting to Rs 60002.90 crore resulting in net assets amounting to Rs 6234.56 crore alongwith contingent liabilities of Rs 285.63 crore, capital commitment of Rs 840.05 crore and national principal of derivative contract of Rs 13903.57 crore pertaining to the financial undertaking are transferred from the Holding Company to IDFC Bank Limited and in consideration, equity shares of IDFC Bank Limited, in the ratio of 1:1 have been issued to the shareholders of IDFC Limited.