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IOB falls 3% post S&P downgrade on weak asset quality

"We downgraded IOB following a recent deterioration in the bank's asset quality and our expectation that it will remain weak over the next 12 months," S&P said in a statement.

November 05, 2014 / 12:58 PM IST
 
 
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Shares of Indian Overseas Bank fell 3 percent intraday on Wednesday after Standard & Poor's cut its ratings. The global rating agency has lowered credit rating of IOB to BB+, indicating speculative grade following deterioration in the lender's asset quality.


"We downgraded IOB following a recent deterioration in the bank's asset quality and our expectation that it will remain weak over the next 12 months," S&P said in a statement.


 "We revised our assessment of the bank's risk position to weak from moderate, as our criteria define those terms. Accordingly, we lowered the bank's stand-alone credit profile (SACP) to BB from BB+," it said.


IOB's exposure to high-risk sectors, such as iron and steel and textiles, is also greater than peers'. Its reported non-performing loan ratio rose sharply to 7.3 percent as of September 30, 2014, from 5 percent as of March 31, 2014, to become the highest among the Indian banks that are rated. The share of gross standard restructured loans outstanding in IOB's loan book is also high at 7.85 percent.


The PSU had reported a net loss of Rs 245.51 crore for the second quarter ended September 30 due to higher tax expenses and provisions for bad assets. The bank had reported net profit of Rs 132.55 crore during July-September quarter in the previous fiscal.

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The bank made provisioning for bad loans to the tune of Rs 892.38 crore in the second quarter of 2014-15, up from Rs 619.90 crore in the same period a year ago.


At 11:57 hrs Indian Overseas Bank was quoting at Rs 58.65, down Rs 1.45, or 2.41 percent on the BSE.

With inputs from PTI

first published: Nov 5, 2014 12:12 pm

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