Indian Overseas Bank (IOB) on Monday reported a 21% rise in its net profit for the third quarter to ₹874 crore on the back of strong growth in interest income. Total income rose 13% to ₹8,409 crore, while interest income grew 15% to ₹7,112 crore.
Total business grew 10% to ₹5.43 lakh crore during the quarter under review. Advances grew 10% to ₹2.38 lakh crore, while total deposits also grew 10% to ₹3.05 lakh crore. However, deposits saw a sequential decline from ₹3.11 lakh crore in the July-September quarter.
Managing Director and CEO Ajay Kumar Srivastava attributed the sequential decline in deposits to maturity of high-cost bulk deposits. He said IOB chose to prioritise low-cost CASA deposits over wholesale deposits, which accounted for only ₹16,000 crore or 4% of total deposits during the latest quarter. The bank’s cost of funds increased to 5.24% from 5.02% in the year-ago period.
“We are aggressively focusing on adding CASA clients. In the last 21 months, we have added 52 lakh new CASA clients, resulting in new CASA business of ₹17,000 crore,” he said at the earnings press conference. The share of CASA in total deposits remained stable at 43%. Cost of deposits declined from 5.15% in Q2FY25 to 5.08% in Q3FY25.
On the advances side, the share of retail, agriculture and MSME (RAM) in domestic loans increased to 78% in Q3FY25 from 69% in the same quarter last year. The share of corporate advances fell to 22% from 31% in Q3FY24. Srivastava said the bank had shed 3-4 large corporate loan accounts of ₹2,500-3,000 crore, after maturity due to unsatisfactory interest rates.
The RAM and corporate loan ratio is currently 77:23. The bank plans to increase the corporate loan share to 30%. Asset quality improved significantly, with gross non-performing assets (NPAs) as a percentage of gross advances declining to 2.55% by December 2024 from 3.90% a year ago. Net NPAs improved to 0.42% from 0.62%. Recovery stood at ₹956 crore compared to ₹1,041 crore in the previous quarter.
Srivastava said recovery in Q2FY25 was unusually high due to significant recovery from two large accounts through technical write-off and NCLT. The bank has set a recovery target of ₹5,500 crore for FY25 and has achieved ₹3,021 crore so far. “We are confident of recovering over ₹2,500 crore in the last quarter.”
On fundraising plans, Srivastava said the bank has received approval to raise ₹2,000 crore through qualified institutional placement, and plans to raise this amount during the current quarter. The QIP is expected to reduce the government’s stake in IOB, which is currently over 96%, by 2-2.5%.
On Monday, IOB shares closed 3% higher at ₹52.27 on the NSE.
