Indian Overseas Bank Q3FY14 Posts Disappointing Results, Net Profit Goes Down By 35.56% to Rs 75.07 Crore

Public sector Bank, Indian Overseas Bank (IOB) again disappointed the street with poor financial numbers for Q3FY14. Its net profit slumped by 35.56% on YoY basis to stand at Rs 75.07 crore which was in line with the street estimates. The net profit has dropped due to higher provisions and operating expenses. Its provisions and contingencies rose to Rs 811.24 crore in the December 2013 quarter, up 3 basis points from the December 2012 figure.

The Net Interest Income (NII) in the same period decreases by 1.71% year-on-year (down 6.47% Q-o-Q) to Rs 1357.95 crore against Rs 1381.55 in Q3FY13. IOB’s other income also took beating down by 11.89 % to Rs 452.74 crore during the elapsed quarter from Rs 513.84 crore in the corresponding quarter of the last fiscal. 

The Indian Overseas Bank asset quality also took a battering in Q3FY2014. The bank reported a jump in its Gross NPAs, which came in at Rs 9168.08 crore, up 40.71% YoY from that of Rs 6515.57 crore in Q3FY13 and 11.78% Q o Q from Rs 8201.56 crore in Q2FY14. IOB’s ratio of net non-performing assets (NPAs) to net advances stood at 3.24% as on December 30, 2013, compared to 2.83% as on September 30, 2013 and 2.33% as on December 30, 2012. The ratio of gross NPAs to gross advances stood at 5.27% as against 4.65% on September 30, 2013 and 4.13% as on December 30, 2012.

We believe that its operating performance and asset quality are likely to deteriorate further as per trend. The stock is not fare in terms of R o A also which stood at 0.1% in current quarter as against 0.19% in Q3FY13. The stock hit a high of Rs 46.85 and a low of Rs 42.90 during the day (29 January 2014). Considering all factors liquidity remains tighter, tough macro-economic environment and cost of funds to remains high due to firm deposit rates which should have some stress on the net interest margins of the bank further. Scrip had also underperformed the market in past one quarter. Fair assumption is that the stock is expecting selling pressure after the Q3 result. We suggest investors to stay away from the counter.