S&P downgrades Indian Overseas Bank’s rating to speculative grade

NEW DELHI: Global rating agency Standard & Poor’s on Monday lowered the credit rating of stateowned Indian Overseas Bank (IOB) to BB+, indicating speculative grade following deterioration in the lender’s asset quality.

"We downgraded IOB following a recent deterioration in the bank’s asset quality and our expectation that it will remain weak over the next 12 months," S&P said in a statement.

"We revised our assessment of the bank's risk position to weak from moderate, as our criteria define those terms. Accordingly, we lowered the bank’s stand-alone credit profile (SACP) to ‘BB’ from BB+," it said.

IOB’s exposure to high-risk sectors, such as iron and steel and textiles, is also greater than peers’. Its reported non-performing loan ratio rose sharply to 7.3 per cent as of September 30, 2014, from 5 per cent as of March 31, 2014, to become the highest among the Indian banks that are rated. The share of gross standard restructured loans outstanding in IOB’s loan book is also high at 7.85 per cent.