CARE assigns 'AA-/Stable' rating to Indian Overseas Bank's tier II bonds

10 Mar 2022 , 01:06 PM

CARE Ratings Limited has assigned its rating as ‘CARE AA- /Stable’ (Outlook: Stable) for the proposed issue of Rs800 crore Tier II Bonds (under Basel III) of Indian Overseas Bank.

As per rating rationale report, the rating assigned to the Tier-II Bond (Basel-III) of Indian Overseas Bank (IOB) factors-in the majority ownership by the Government of India (GoI) and demonstrated funding support by GoI, including the equity infusion of Rs4,100 crore in the month of March 2021.

The rating also factors-in the long track record of operations with strong presence in South India, diversified advances book and deposit base with comfortable CASA.

The rating is constrained by moderate asset quality despite improvement seen over the past few years, and the bank’s earnings profile has been moderate as it has started reporting profits in FY21 and 9mFY21; however, the level of profit continues to be moderate and any further impact on account of COVID-19-related stress may impact the asset quality and profitability, going forward.

At around 1:10 PM, Indian Overseas Bank was trading at Rs18.40 apiece up by Rs0.55 or 3.08% on Sensex.