Thursday, October 29, 2015

IOB's asset quality: Moderation or deterioration?

Words used by credit rating agencies communicate a lot. For example, Indian Overseas Bank which continues to be plagued by profitability issues has some of its debt instruments rated by CARE and some by ICRA.

Recently, the bank sent two communications to the stock exchanges. In one communication dated October 20th, mention is made of downgrading of some debt instruments by CARE because of "continuing moderation in Asset quality and financial performance during Q1 FY 16".

Communication of October 28th contains the more blunt words of ICRA which refers to "continuing deterioration in Asset quality".

Obviously 'moderation' and 'deterioration' do not mean the same. Is CARE more issuer-friendly?

Added on Nov 7th:

Response was sought from ICRA and CARE. Their response is given below:

CARE: "Though the statements may be interpreted differently, both refers (SIC) to concerns on asset quality."

ICRA: " IOB's asset quality indicators changed over the last few years as indicated below: 



ParameterFY12FY13FY14FY15Jun-15Sep-15
Gross NPA2.74%4.02%4.98%8.33%9.40%11.00%
While the Sep 2015 results were declared after the latest ICRA rating action, the above table is quite clear that "continued deterioration" is a more appropriate representation while commenting on the asset quality of the bank. "


2 comments:

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Unknown said...


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