State-run Indian Overseas Bank reported robust September quarter results with profitability increasing by 56% year-on-year to ₹1,912 crore from ₹1,226 crore in the base quarter. According to The Economic Times, the lender's Net Interest Income (NII) grew by 26% during the September quarter to ₹3,867 crore from ₹3,059.3 crore earlier. The growth was primarily driven by the bank's core lending business, with interest earned on advances growing 21% year-on-year to ₹7,083 crore. Latest data confirms that interest income rose 17% to ₹9,201 crore during the September quarter of current fiscal, from ₹7,851 crore in the corresponding quarter of last fiscal. Despite other income falling 43% sequentially due to absence of ₹900 crore from priority sector lending certificates (PSLCs) that recurred in Q1, the bank's strong core income growth contributed significantly to bottom-line growth. The Pre-Provisions Operating Profit (PPOP) increased 26% to ₹3,016 crore from ₹2,400 crore, indicating robust operational performance across all key metrics.
The bank demonstrated improved asset quality metrics during the quarter with Gross NPA ratio declining by 64 basis points year-on-year to 1.19%, while Net NPA ratio fell by 12 basis points Y-o-Y to 0.16%. As reported by The Economic Times, slippages remained under control at ₹240 crore with the slippage ratio at 0.07%, one of the lowest in the banking system. In absolute terms, IOB's Gross NPA stood at ₹4,114 crore from ₹4,292 crore in June, while Net NPA stood at ₹543.5 crore from ₹588.4 crore last quarter. NPA recovery during the quarter stood at ₹647 crore, which was 2.95 times the quarterly slippages. The Slippage Ratio in Q2 reduced to 0.07% as against 0.11% YoY and 0.06% QoQ, indicating improved credit management. Most of the increase in provisions was not tied to bad loans, with provisions for non-performing assets being only ₹142 crore out of the total ₹950 crore. Credit costs fell by 1 basis point year-on-year to 0.17%, demonstrating improved risk management practices.
The bank's financial strength improved significantly with Capital Adequacy Ratio increasing by 66 basis points year-on-year to 18.60%, indicating robust capital position. Return on Assets (RoA) improved to 1.53% from 1.20% last year, an increase of 33 basis points, while Return on Equity (RoE) rose to 24.58% from 19.95%, an increase of 463 basis points. According to The Economic Times, net interest margin (domestic) increased by 16 basis points YoY to 3.37%, reflecting improved pricing power and funding cost management. Total income during the period rose 13% to ₹10,428 crore. The bank's management highlighted that IOB would require additional provisions of around ₹2,600-2,800 crore under the expected credit loss (ECL) framework, but has already created ECL provisions of around ₹2,700 crore, covering 100% of the current requirement as forward-looking provisions. The bank plans to continue building buffers over the next two quarters to maintain adequate provisioning levels.
The bank demonstrated strong business growth with total deposits rising 20% year-on-year to ₹4.07 trillion from ₹3.39 trillion. CASA deposits increased 20.73% Y-o-Y to ₹1.65 trillion, while the CASA ratio (domestic) improved by 13 basis points Y-o-Y to 41.14%, indicating better low-cost deposit mobilization. Advances in Q2FY27 were at ₹3.45 trillion, registering a growth of 24.35% from ₹2.77 trillion. Retail banking was a key driver of growth, with assets in the segment rising 37.8% year-on-year to about ₹2.50 lakh crore. As reported by The Economic Times, advances were driven by strong growth in the RAM (Retail, Agri and MSME) portfolio, with retail credit up 33.77%, agriculture up 47.31% largely on agri jewel loans, and MSME credit up 13.8%. The bank's management highlighted that the gold loan portfolio was performing well, with outstanding jewellery loans of nearly ₹1.36 trillion in a healthy portfolio with no stress signs. Following the results announcement, shares of Indian Overseas Bank surged to the day's high, currently trading 4.56% higher at ₹30.01 on Monday.
The bank successfully mobilized ₹11,000 crore ($1.2 billion) in FCNR(B) deposits under the special window, with the entire amount being suitably deployed according to The Economic Times. IOB is targeting $500 million in fundraising through the RBI's ECB window by December, with the first tranche of $250 million to be raised at 6-6.25% rate in the next couple of weeks. MD & CEO Ajay Kumar Srivastava explained that "We have decided to go for a staggered ECB mobilisation to make it most cost effective. There is consistent credit demand but mobilising lendable resources at one go and keeping it idle does not make sense." The bank has benchmarked its systems against industry practices and engaged PwC to identify gaps and recommend improvements for cybersecurity, describing the approach as a continuous process requiring round-the-clock monitoring. Besides rural, agriculture and MSME credit demand, we have a robust corporate loan pipeline. We disbursed ₹17,000 crore of corporate loans in the first six months of the fiscal while there is another ₹20,000 crore in the pipeline, expecting 80-90% of it to be disbursed by the end of the fiscal.
