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ICRA assigns LAA rating to proposed Rs 2 bln perpetual bonds of IOB

Written by: Staff

New Delhi, May 15 (UNI) Credit rating agency ICRA today assigned the LAA rating to the proposed Rs 2 billion perpetual bonds of Indian Overseas Bank (IOB).

IOB has an outstanding ICRA rating of LAA for its Rs 3 billion perpetual bonds and LAA+ rating assigned to the Rs 5.50 billion (conventional) subordinated bonds programme of IOB.

The one notch lower rating assigned to the perpetual bonds reflect the specific features of these instruments wherein the debt servicing is additionally linked to meeting the regulatory norms on capitalisation and reported profitability.

IOB's ratings take into account the consistent growth maintained in credit over the past several years, the improvement achieved in its asset quality, and the bank's improving core profitability.

The rating also draws comfort from IOB's domestic retail deposit base, its adequate capitalisation and its majority ownership by the Government of India (GoI). The rating factors in the challenges the bank faces in terms of continuing to adequately manage the credit risk arising out of its substantial exposure to mid-tier corporates and its ability to grow its retail advances portfolio without impacting overall asset quality.

With a 61 per cent ownership by GoI, IOB is one of the larger commercial banks in the country, with an asset base of Rs 592 billion as on March 31, 2006.

During 2005-06, IOB reported a total income of Rs 49.47 billion and net profits of Rs 7.83 billion, as against Rs 45.91 billion and Rs 6.51 billion respectively during 2004-05.


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