IOB to raise Rs 3500 crore for expansion

Public sector Indian Overseas Bank today said it will be raising around Rs 3,500 crore in core tier-I capital over the next three years to fund expansion.

Tier 1 capital is the core measure of a bank's financial strength from a regulator's point of view. 

"We will be needing roughly Rs 1,200 crore per annum for the next three years given the expansion plans which we have drawn up," the Chennai-headquartered bank's executive director Nupur Mitra told reporters here.

IOB chairman and managing director M Narendra said the bank had already written to the Central Government, which owns a 66% stake, about its capital raising plan of up to Rs 1,400 crore for FY 12.

"In our annual general meeting, we passed an enabling resolution to the money. We are yet to finalise the route which we would adopt like a follow-on offer, institutional placement etc," he said.

The bank's total capital adequacy as on June 30 stood at a comfortable 13.38 per cent, and it is targeting a credit growth of up to 22% for the fiscal, Narendra added.

The bank's net profit for the quarter ended June 2011 inched up over the same period last year to Rs 205 crore due to flat growth of higher provisioning on revised regulatory stance and migration of non performing assets (NPA) detection to system-based one, he said.

IOB's net interest margin also narrowed down to 2.85% from 3.11% in March 2011 in the higher interest rate scenario.

It also witnessed a reduction in the low-cost CASA (current and savings account) deposits to 27.56% from the year ago's 33.12% which Narendra said was due to flight towards the high interest earning term deposits.

The IOB chairman also said the bank was targeting to increase this share up to 33% by end FY12 by ramping up its network.

It plans to open 400 branches this year which will take its total network to 2,600 branches and add another 1,000 automated teller machines (ATMs), he added.