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IOB's Rs 3 bn Tier 1 perpetual debt issue gets Crisil's AA+ rating

Written by: Staff

Mumbai, Mar 31 (UNI) India's premier ratings agency, Crisil, has assigned a AA+ rating to Indian Overseas Bank (IOB)'s Rs 3 billion Tier 1 perpetual debt issue.

A press release issued here today stated that the high rating for the Bank by Crisil reflects IOB's majority ownership by, and support from, the Government of India (GoI).

''The ratings also factor in the improvement in the Bank's resource profile,'' stated the release, adding that ''the proportion of low-cost deposits in the Bank's total deposit mix improved to 39 per cent as on March 31, 2005, from 34 per cent in FY 04''.

The ratings draw strength from the Bank's good core profitability, with Crisil describing the Bank as being ''one of the few public sector banks to show continuously growing profit after tax (PAT) for the last three years''.

The ratings also take into consideration the improvement in the Bank's overall non-performing asset (NPA) levels due to higher recoveries with its gross NPAs improving to 5.28 per cent in FY 05 from 7.4 per cent a year ago.

Crisil has expressed the opinion that the profit trend exhibited by the Bank will continue though it cautions that the stand-alone credit profile of the Bank is, however, tempered somewhat by its average Tier 1 capitalisation level which stood at 7.1 per cent in FY 05.

The release also sounded a cautionary note on the Bank's exposure to borrowers in the mid-tier of the credit spectrum.

On the future outlook of IOB which reported a PAT of Rs 5.8 billion for the nine-months ended December 31, 2005, the release stated that it expected the Bank to continue to benefit from GoI's support.

Crisil's opinion is that the good resource profile of the Bank and its healthy market position with an asset base of over Rs 500 billion in FY 05 ''will continue to provide stability to IOB's stand-alone credit risk-profile''.

Over the medium-term, IOB's operations will remain profitable and the Bank will continue to comply with regulatory capital adequacy requirements, stated the release.


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