Indian Overseas Bank (IOB) Posts Poor Q4FY13 Numbers

IOB has recently posted a disappointing set of numbers for Q4FY13. While the bank’s NII has dropped by 3% and provisioning has increased by more than double, a better performance in the other income was the only saving grace.

Indian Overseas Bank (IOB), one of the south based public sector banks, has reported a drop of 89% in its net profit to stand at Rs 58.87 crore on a yearly basis for Q4FY13 as compared to Rs 528.81 crore posted in the same quarter last year. The reason for such a large drop was the deteriorating asset quality of the bank. The bank’s total provisioning increased by 206% on a yearly basis to Rs 1186.56 crore for Q4FY13. 

Besides, the lower net interest margins (NIM) too were responsible for this fall. The NIM for the quarter stood at 2.3% against 2.8% in the corresponding quarter of the previous year. The net interest income of the bank saw a drop of 3 % on a yearly basis to Rs 1295.6 crore. Nonetheless, the 33% increase in other income to Rs 671 crore in the same period saved the day for IOB.

In terms of asset quality of the bank, it remains one of the worst performers till date. The gross NPA of the bank as a percentage of advances has increased 4.02% for Q4FY13 as compared to 2.74% in Q4FY12. Even the net NPA has doubled in the same period to 2.5%.

If we analyse the revenue performance of the bank on segment basis, the retail side of the bank pulled down its overall growth, which declined by 17%, while corporate and treasury grew by 16% and 14% respectively in the same period. Even under segmental profit, the retail banking division was a dampener and posted a loss of Rs 57.8 crore (Q4FY13) against a profit of Rs 430 crore (Q4FY12).

The IOB stock is currently trading at a price to book value of just 0.54x, which looks quite attractive. However, looking at the worsening asset quality and a fall in the return on asset (0.09% for Q4FY13) of the bank, we advise readers to stay away from the counter.