Indian Overseas Bank becomes the second most-valued public lender

Indian Overseas Bank (IOB) has become the second most-valued listed public sector bank (PSB) with a market capitalisation of over Rs 50,000 crore. As Street discounts privatisation of the state-owned lender, its shares have appreciated nearly 80 per cent on the BSE in the past one month.

On a closing basis, the bank’s market cap was Rs 51,887 crore at the end of trading on Friday, surpassing its peers Punjab National Bank (PNB) and Bank of Baroda (BOB). While IOB crossed BoB on Wednesday, it beat PNB in market value on Thursday, and expanded the lead the next day.

At Friday’s close, PNB was valued at Rs 46,356 crore and BoB at Rs 44,060 crore, which are now ranked third and fourth among PSBs, respectively. In the past one month, the market price of PNB has fallen 4 per cent while BOB is up 5 per cent, as against the Sensex’s 1.2 per cent rise.

The stock of IOB had hit an over four-year high of Rs 29 on June 30, its highest level since May 2017, following reports that IOB and Central Bank of India might be privatised in the first phase of the privatisation drive. According to media reports, the two lenders might see 51 per cent sale in the first phase of disinvestment.

The privatisation plan was announced in the Union Budget for 2021-22 as part of the government’s broader divestment goals for FY22. It includes privatisation of several other non-financial state-owned entities and listing of the wholly-owned Life Insurance Corporation of India.

Financially, IOB’s net profit jumped over two times to Rs 350 crore in the March quarter (Q4FY21) on the back of higher non-interest income, from a net profit of Rs 144 crore a year ago. Sequentially, too, it was higher than net profit of Rs 213 crore in Q3. The bank’s asset quality showed improvement with gross non-performing assets (NPAs) falling to 11.69 per cent of gross advances as of March 31, from 14.78 per cent a year ago. Net NPAs fell to 3.58 per cent from 5.44 per cent.

The bank plans to come out of the Prompt Corrective Action (PCA) framework by focusing on recovery, low-cost deposits, and less capital consuming advances, the lender said in a statement.

The bank said its board has approved the capital plan for FY22 under which it will issue equity shares up to a maximum extent of 1.25 billion by way of a follow-on public offer/rights issue. The issue may be with or without participation from the government (holds 96.38 per cent) or to qualified institutional buyers.