Indian Overseas Bank Soars to Record Profits in Q2 FY26 with Robust Growth and Improved Asset Quality

Indian Overseas Bank (IOB) has delivered an exceptional performance in the second quarter of the financial year 2026, ending September 30, 2025. The bank reported a record-breaking net profit of INR 1,226 crore, marking a substantial 57.79% year-on-year increase. This impressive growth underscores the bank's strategic initiatives and operational efficiencies, positioning it as a strong contender in the public sector banking space. The overall business mix expanded by over 14.1%, reaching INR 617,034 crore, reflecting broad-based growth across key segments.

The bank's total income for the quarter stood at INR 9,214 crore. Interest income, the primary revenue driver, contributed significantly, with interest on loans at INR 5,920 crore (64.25% of total income) and interest on investments at INR 1,872 crore (20.32%). Non-interest income streams also played a crucial role, including exchange and commission at INR 452 crore and recoveries from technically written-off accounts at INR 416 crore. This diversified income profile, coupled with a healthy Net Interest Margin (NIM) of 3.21%, demonstrates the bank's ability to generate revenue efficiently. Operating profit for the quarter reached INR 2,400 crore, growing 12.78% year-on-year, further highlighting operational strength.

Asset Quality and Capital Adequacy: Pillars of Strength

Indian Overseas Bank has made remarkable strides in improving its asset quality. Gross Non-Performing Assets (NPA) significantly reduced to INR 5,078 crore (1.83%) in September 2025, down from INR 6,249 crore (2.72%) in September 2024. Similarly, Net NPA decreased to INR 776 crore (0.28%) from INR 1,059 crore (0.47%) over the same period. The Provision Coverage Ratio (PCR) improved to an impressive 97.48%, reflecting prudent risk management and a strong balance sheet. Management emphasized a tight control on slippages, with the slippage ratio for the quarter at 0.11%, indicating proactive measures to prevent asset quality deterioration.

Capital adequacy remains robust, with a Capital to Risk-Weighted Assets Ratio (CRAR) of 17.94%, comfortably exceeding the regulatory requirement of 11.5%. This strong capital base provides ample headroom for future business expansion and absorbs potential shocks. The bank's Return on Assets (ROA) improved to 1.20% for the quarter, a 38 basis points increase year-on-year, while Return on Equity (ROE) surged to 19.95% from 16.9% in the previous year, demonstrating enhanced profitability and efficient capital utilization.

Strategic Initiatives: Digital First and Expansion Focused

IOB is actively pursuing a digital-first strategy to enhance customer experience and operational efficiency. The bank has revamped its mobile banking platform, launching a new app with integrated UPI, bill payments, and account aggregator functionalities. WhatsApp Banking has been introduced for seamless access to services like balance inquiry and ATM/branch locators. Furthermore, the bank has launched an AI-powered tool, 'www.aksharapin.iob.in', to create personalized banking PINs, promoting cybersecurity awareness. Robotic Process Automation is being implemented to automate repetitive tasks, reducing errors and increasing efficiency. The bank is also fostering collaborations with Fintechs and leveraging Digital Public Infrastructures to develop innovative solutions.

On the expansion front, IOB plans to open approximately 240 new branches in the next 6 to 9 months, prioritizing districts without an existing presence and regions with high business potential. This physical expansion complements its digital outreach, ensuring comprehensive market penetration. The bank's focus on ESG initiatives is also noteworthy, with the introduction of green finance products like IOB E-Vehicle Loan, IOB Green Deposit, and IOB Surya Loan, aligning with sustainable banking practices.

Outlook: Sustained Growth and Enhanced Shareholder Value

Indian Overseas Bank's management expressed confidence in sustaining the growth momentum, guiding for a minimum credit growth of 12% for the full financial year, with potential to reach 17-20%. The bank's consistent quarter-on-quarter profitability, robust asset quality improvements, and strategic digital and physical expansion initiatives underscore its commitment to enhancing shareholder value. The proactive approach to risk management, coupled with a focus on diversified revenue streams and capital optimization, positions IOB for continued success in the evolving banking landscape. The bank's journey from PCA restrictions to achieving record profits reflects a strong turnaround and a clear vision for future growth.