Indian Overseas Bank Financials: Strong Profits and Asset Quality

Introduction to Indian Overseas Bank's Performance

Indian Overseas Bank (IOB), a prominent public sector bank, is demonstrating strong financial health amidst a rapidly growing Indian banking sector. Favorable government policies, rising consumer income, and increased infrastructure spending have created a positive environment for banks. In this context, IOB has delivered a noteworthy performance, marked by consistent profit growth, significant improvements in asset quality, and a solid capital base. The bank's recent financial results reflect effective management and a strategic focus on strengthening its balance sheet, making it a subject of interest for investors tracking the public sector banking space.

Consistent Profitability and Revenue Growth

IOB has reported a consistent upward trend in its quarterly profits. For the quarter ending September 2025, the bank posted a 58% year-on-year rise in net profit to ₹1,226 crore. This followed a strong performance in the March 2025 quarter, where net profit increased by 30% to ₹1,051 crore. The bank's Managing Director and CEO, Ajay Kumar Srivastava, has expressed confidence in maintaining and building upon this profitability. The core income streams also show robust growth. In the latest financial year, IOB earned a total revenue of ₹28,131.01 crore, recording an impressive revenue growth of 18.91% over the last three years. This performance is supported by healthy expansion in its lending activities.

Expansion in Advances and Deposits

The bank's loan book has expanded significantly, with advances reporting a year-on-year rise of 15.11%. Over a three-year period, the advances growth stands at a strong 19.40%. This indicates a healthy demand for credit and the bank's ability to capitalize on it. On the liabilities side, IOB maintains a stable funding base. The total deposits stood at ₹3,11,938.82 crore in the last financial year. A key strength is its Current Account Savings Account (CASA) ratio, which is currently at 43.65%. A higher CASA ratio is beneficial as it provides the bank with a low-cost source of funds, positively impacting its net interest margin.

Significant Improvement in Asset Quality

A standout feature of IOB's recent performance is the substantial improvement in its asset quality. The bank has effectively managed its loan portfolio, bringing down non-performing assets (NPAs). As of the latest financial year, the Gross NPA ratio stood at 2.14%, a marked improvement from previous levels. More impressively, the Net NPA ratio has been reduced to just 0.37%. These figures suggest efficient recovery mechanisms and prudent lending practices. The bank's provisioning coverage ratio has also been strengthened, with a 24.62% year-on-year increase in provisions and contingencies, indicating a conservative approach to risk management.

Key Financial Health Indicators

A closer look at IOB's financial ratios provides further insight into its operational efficiency and stability.

Capital Management and Fundraising

IOB maintains a robust Capital Adequacy Ratio (CAR) of 19.74%, comfortably exceeding regulatory norms. This strong capital position supports its growth and provides a cushion against financial shocks. To further bolster its capital base, the bank recently issued Basel III Compliant Tier II bonds, successfully raising ₹1,000 crore on January 23, 2026. The issue was heavily oversubscribed, reflecting strong investor confidence. Looking ahead, IOB has plans to raise an additional ₹4,000 crore in capital during the 2026 financial year to support its ongoing business expansion.

Shareholding and Market Valuation

As of December 2025, the promoter, the Government of India, holds a 92.44% stake in the bank. Domestic Institutional Investors (DIIs) hold 4.27%, while Foreign Institutional Investors (FIIs) have a 0.35% stake. The bank's market capitalization stands at approximately ₹65,722.74 crore. With a share price of around ₹34.9, the stock trades at a P/B ratio of 1.99, which is below its historical average of 2.49. This could suggest a reasonable valuation relative to its past levels.

Conclusion

Indian Overseas Bank has demonstrated a strong financial turnaround, characterized by robust profit growth, expanding advances, and a significant improvement in asset quality. Its solid capital adequacy, healthy CASA ratio, and effective management of non-performing assets position it well within the public sector banking landscape. With a clear strategy for future capital raising and a confident outlook from its leadership, IOB appears to be on a stable growth trajectory. Investors will be watching to see if the bank can sustain this momentum and continue to deliver value in the dynamic Indian financial market.