IOB Net Profit Jumps 57%; Bank Unveils ₹4,000 Crore QIP Plan

Strong Quarterly Performance Sets the Stage

Indian Overseas Bank (IOB) has reported a robust financial performance for the second quarter of fiscal year 2025-26, posting a significant 57.5% year-on-year increase in net profit, which stood at ₹1,227 crore. This strong result was driven by healthy growth in interest income and a notable improvement in asset quality. The public sector lender's revenue from interest earned grew by 14.55% to ₹7,850 crore for the quarter. Building on this momentum, the bank has also announced a substantial capital-raising plan to fortify its balance sheet and support future growth initiatives.

Financial Health and Asset Quality

The bank's performance reflects a consistent upward trend observed over recent quarters. For the quarter ending December 31, 2025 (Q3FY26), IOB reported a net profit of ₹1,365 crore, a 56% increase from the previous year. This sustained profitability is supported by a significant improvement in the bank's asset quality. As of September 2025, the Gross Non-Performing Assets (GNPA) ratio improved to 1.83%, while the Net Non-Performing Assets (NNPA) ratio stood at a healthy 0.28%. This reduction in bad loans has led to lower provisioning requirements, directly contributing to higher net profits and strengthening the bank's overall financial position. The Capital to Risk-Weighted Assets Ratio (CRAR) was a comfortable 16.30% as of December 2025, well above the regulatory requirement.

Strategic Capital Infusion Plan

IOB's board has outlined a plan to raise ₹4,000 crore during the current financial year, primarily through a Qualified Institutional Placement (QIP). A QIP allows a listed company to raise capital from institutional investors without undertaking a public offering. According to MD & CEO Ajay Kumar Srivastava, this fundraising is anticipated to take place in the third or fourth quarter of the fiscal year. The capital infusion is intended to bolster the bank's capital base, support credit growth, and finance operational expansion.

Impact on Government Shareholding

The successful execution of the ₹4,000 crore QIP will result in a dilution of the Government of India's stake in the bank. The government's shareholding, which currently stands at over 94%, is expected to decrease to approximately 90%. This move aligns with the government's broader strategy of reducing its stake in public sector undertakings to meet SEBI's minimum public shareholding norms and improve market liquidity for the stock. A wider investor base can also enhance corporate governance and market-driven efficiencies.

Management's Confident Outlook

CEO Ajay Kumar Srivastava has expressed strong confidence in the bank's ability to sustain its performance. He stated that the bank is confident of maintaining a net profit of over ₹1,000 crore in the coming quarters, citing a consistent upward trend in profitability over the last two years. The management has guided for an overall business growth of around 12% for the current financial year, a target they are comfortable achieving and potentially exceeding. The bank also has a recovery target of ₹4,500 crore from non-performing assets for the fiscal year, having already recovered ₹851 crore in the first quarter.

Peer Landscape in the PSU Banking Sector

IOB's performance is notable when viewed alongside its public sector peers. While larger banks like SBI and PNB command a greater market share, IOB's recent growth metrics are competitive. The bank's focus on improving asset quality and maintaining profitability showcases its strategic efforts to strengthen its market position.

Analysis and Forward Look

The combination of strong quarterly earnings and a clear roadmap for capital raising positions Indian Overseas Bank for a period of sustained growth. The infusion of ₹4,000 crore will provide the necessary capital to expand its loan book while maintaining healthy capital adequacy ratios. For investors, the key monitorable will be the successful completion of the QIP and the bank's ability to continue its trajectory of improving profitability and asset quality. The dilution of the government's stake is a significant step that could attract more institutional interest in the long run. The bank's consistent performance and strategic initiatives suggest a focused approach to navigating the competitive banking landscape.