IOB to raise Rs 3,500 crore for expansion

Indian Overseas Bank | Bank - Public | BFSI | BSE: 532388 | NSE: IOB

04 Aug 2011 Evaluate

Indian Overseas Bank (IOB), a public sector bank will be raising up to Rs 3,500 crore in core TIER-I capital over the next three years to fund expansion. The bank will need roughly around Rs 1,200 crore per annum for the next three years given the expansion plans it has chalked out.

The bank had already written to the Central Government, which owns a 66 percent stake, about its capital raising plan of up to Rs 1,400 crore for FY 12. The bank is yet to finalize the route which it would adopt like a follow-on offer, institutional placement etc for raising money.

As on June 30, the bank's total capital adequacy stood at comfortable 13.38 percent and it is targeting a credit growth of up to 22 percent for the fiscal. Due to the higher interest scenario, IOB's net interest margin also narrowed down to 2.85 percent from 3.11 percent in March 2011. It also witnessed a reduction in the low-cost CASA (current and savings account) deposits to 27.56 percent from the year ago’s 33.12 percent.

The bank’s net profit for the quarter ended June 30, 2011 has registered 2.56% growth at Rs 205.58 crore as compared to Rs 200.44 crore for the corresponding quarter of the previous year. Its total Income has increased by 50.28% at Rs 4331.77 crore for the Q1FY12 from Rs 2882.38 crore for the Q1FY11.

TIER-I capital is the core measure of a bank's financial strength from a regulator's point of view.