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IOB Gross NPA at 20.48%, CAR in danger zone at 9.47 %: Result Analysis


Indian Overseas Bank is in serious trouble, not because of the losses it is making, its just because of 20.48% of advances are gross NPA’s and its capital adequacy ratio (CAR) is below RBI stipulated 9.6% and stands at 9.47%
RBI has mandated the banks to maintain a minimum CAR of 9.6%, for which IOB has already breached. Even though according to the disclosure by the bank, the CAR would change to 10.37% after capital infusion of Rs 1551 Cr by first round of capital infusion by Govt. of India. It has also stated that their will be a second round of funding by Govt of India to the tune of Rs 1551 Cr again.10.37% is still a not good CAR to maintain for a bank like IOB as the NPA are very high. The bank has already raised Rs 261.94 Crs by Qualified Institutions Placement in the current quarter.
This is going to be crazy: at 20% Gross NPAs, 1 in 5 loans are bad! This bank better raise capital fast, because what it has will be wiped out with the losses.

  • Income from interest has gone down by 12.05% QoQ. and the losses are to the tune of 1450 Crs.
  • Advances declined by 5.37% and deposits by 5.85% QoQ.
  • Net interest margin is below 2%, currently at 1.87%.
  • Operating Margin has improved from 8.33% for Q1FY16 to 11.76% for Q1FY17.
  • Provisions have  increased by 2 times QoQ.
  • Reserves and share capital is down by 12.98% QoQ. which means they are using reserves for provisioning of their bad loans.
  • Gross NPA has increased by 12.86% from previous quarter and Net NPA by 10.98%

Indian Overseas Bank Q1FY17 Results
The results were declared post market hours. Stock closed at Rs 27.3.
Indian overseas Bank Q1FY17 Share Price Movement


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Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.


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