IOB to improve Casa, reduce NPA in FY14

Indian Overseas Bank (IOB) said it would focus on improving its current and savings account (Casa) deposits and on reducing non-performing assets (NPA), while improving net interest margin during FY14. The bank has already set up specialised asset recovery management branches to improve the recovery of NPA accounts. Addressing shareholders at the bank’s annual general meeting on Friday, chairman and managing director M Narendra said the total business was Rs 3,66,501 crore as on March 31, up 14 per cent from Rs 3,21,707 crore in the year-ago period.

Narendra added the bank had got the licence to open branches at Bangkok (Thailand) and Colombo (Sri Lanka). The bank has plans to open branches in Vietnam, Mongolia, and the Republic of Korea as well. According to IOB’s annual report, the finance ministry has given its approval for the bank to open branches in these countries, either through joint ventures or wholly-owned subsidiaries.

In FY13, banks in India had to operate in an environment of slower growth due to the general slump in the economy, especially in sectors such as iron and steel, textiles, aviation and infrastructure, impacting  exposure to these segments. “There was a spurt in the number of accounts referred to restructure,” said Narendra, while not sharing the number of accounts.

He expressed the hope that the coming year would see improved prospects and a revival in investor sentiments thanks to various factors such as softening of global commodity prices, a pick-up in Indian exports, favourable monsoon conditions and the recent economic revival measures announced by the Centre.

On the bank’s plans for 2013-14, Narendra said increased thrust and effective steps will be taken to improve Casa deposits, focused attention on reduction of NPA through intensive recovery measures through the year, while ensuring asset quality. The bank will give a renewed focus on improving net interest margin by efficient use of existing resources, he added.

According to Narendra, IOB has made good cash recovery and upgradation of Rs 1,755 crore in NPA accounts in 2012-13. The bank’s gross NPA ratio was at 4.20 per cent as on March 31, 2013, against 2.74 per cent in March 31, 2012 and net NPA was at 2.50 per cent, compared to 1.35 per cent in the year-ago period.

Fund raising
IOB has sought shareholders’ approval to mobilise Rs 413 crore to comply with the capital adequacy norms. The bank said the fund will be mobilised through issuance of 413 million shares of the face value of Rs 10 each, either through fresh equity, rights issue, preference shares or qualified institutional placement.

The bank’s existing equity share capital stands at Rs 924 crore. The proposed fresh capital will take the total paid-up share capital to Rs 1,337 crore, which will be well within the total authorised capital of Rs 3,000 crore.

The bank expects to have an additional capital of Rs 2,300 crore by the end of the year, to take the tier-I capital adequacy ratio to 8 per cent from the current 7.8 per cent.

Narendra said, the bank’s CRAR (capital to risk weighted assets ratio) according to the Basel frame work works out to 11.85 per cent as on March 31, 2013. In FY13, the bank made preferential allotment of 127,097,102 equity shares of face value of Rs 10 per share at the rate of Rs 78.68 per share (including premium of Rs 68.68 per share) aggregating to Rs 1,000 to the Centre.

The preferential allotment helped the bank maintain its core capital at 7.08 per cent.

The bank also raised $500 million by issue of dollar-denominated bonds with tenor of 5.5 years. The proceeds of the issue is being exclusively deployed for the bank’s overseas operations.