Summary
Indian Overseas Bank - Q3 FY2026 Earnings Call Summary Wednesday, January 14, 2026 16:00 IST
Event Participants
Executives 4 Ajay Kumar Srivastava (MD & CEO), Dhanaraj T (Executive Director), Joydeep Dutta Roy (Executive Director), Madhaw Chandra Jha (CFO)
Analysts 6 Ashlesh Sonje, Ashok Ajmera, Bimal Panchal, Niteen S. Dharmawat, Pinaki Banerjee, Rana Aryan
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total Deposits | ₹3,49,302 crores | +14.48% YoY; driven by 16.3% growth in retail term deposits. |
| CASA Ratio | 40.85% | -108 bps YoY; Management noted domestic CASA remains higher at 41.29%. |
| Gross Advances | ₹2,94,974 crores | +24.13% YoY; growth across Retail, Agri, MSME (RAM) and selective corporate lending. |
| GNPA | 1.54% | -101 bps YoY; significantly reduced from 2.55% through recoveries and technical write-offs. |
| NNPA | 0.24% | -18 bps YoY; improved from 0.42% in Dec 2024. |
| PCR | 97.49% | +42 bps YoY; indicates high resilience against potential bad loans. |
| Net Profit | ₹1,365 crores | +56.18% YoY; all-time high quarterly profit despite higher standard provisions. |
| NIM (Global) | 3.32% | +11 bps YoY; improved from 3.21% despite cumulative rate cuts in the system. |
| ROA | 1.28% | Improved from previous quarters; reflects enhanced asset efficiency and profitability. |
| CRAR | 16.30% | -70 bps YoY; remains well above 11.50% regulatory requirement; reaches 18.40% if H1 profits included. |
Geographic & Segment Commentary
- Domestic Operations: The domestic CD ratio stands at 81.18%, which management considers manageable. Domestic CASA remains strong at 41.29%, positioning IOB among the top three public sector banks for this metric.
- Overseas Operations: Overseas Gross NPA is elevated at 8.5% due to local regulatory constraints lacking SARFAESI-like recovery powers. Recovery is processing through local courts with securities already liquidated and proceeds appropriated.
- RAM (Retail, Agri, MSME): This segment constitutes 76% of the total loan book. Growth is decentralized across 3,400 branches, ensuring risk diversification and higher yields compared to corporate lending.
Company-Specific & Strategic Commentary
- Tax Regime Transition: The bank shifted to the New Tax Regime in Q3 FY26 after exhaustive utilization of Deferred Tax Assets (DTA), which was brought down to nil from ₹2,900 crores.
- Digital Transformation: Approximately 13-14% of new retail loans are now digitally sourced. The bank allocated ₹1,600 crores for IT in FY26, including core banking modernization and branch network upgrades.
- Provisioning Strategy: Management created a voluntary buffer of ₹800 crores in additional standard provisions and ₹1,500 crores in forward-looking ECL provisions to strengthen the balance sheet.
- Capital Raising: The bank has board approval for a ₹4,000 crore QIP to be executed in Q4 FY26, which will reduce Government of India holding from 92.44% to approximately 88%.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Credit Growth | 24% - 25% for FY26 | Based on strong momentum in RAM and selective corporate onboarding. |
| GNPA | Reduction by 5-7 bps | Target for Q4 FY26 through continued aggressive recovery. |
| NIM (Global) | 3.30% - 3.40% | Management aims to maintain this range through optimized pricing and CASA focus. |
| Recovery | >₹4,000 crores for FY26 | ₹2,600 crores achieved in 9M; expecting ₹1,400-₹1,500 crores in Q4. |
| Dividend | Recommencing in FY27 | First dividend expected since exiting PCA, supported by high ROE and net profit growth. |
Risks & Constraints
| Risk | Context |
|---|---|
| Concentration Risk | While RAM is 76%, overseas NPAs remain sticky at 8.5% due to slow legal resolution processes in foreign jurisdictions. |
| Deposit Competition | High credit growth (24%+) puts pressure on the CD ratio (currently 84.45% global), requiring aggressive retail deposit mobilization to maintain LCR. |
| Capital Dilution | Government holding at 92.44% requires significant dilution (to 75%) to meet SEBI norms, which may create equity overhang in the medium term. |
Q&A Highlights
Asset Quality & Provisions
- Question: What caused the spike in “other provisions” to ₹928 crores? (Ashok Ajmera)
- Answer: It includes ₹800 crores of voluntary additional standard provision as a buffer and ₹1,500 crores in ECL provisions. (Ajay Kumar Srivastava)
Capital & Government Stake
- Question: How will the bank reach the 75% promoter holding limit? (Ashok Ajmera)
- Answer: We are launching a ₹4,000 crore QIP in Q4 FY26 (Feb/Mar) to reduce stake by 4%. Further dilutions will be planned next fiscal via QIP or OFS. (Ajay Kumar Srivastava)
Corporate Loan Strategy
- Question: Why is corporate growth lagging behind RAM? (Pinaki Banerjee)
- Answer: Growth is a deliberate strategy. We prioritize RAM for better pricing and lower capital charges. We only onboard corporates with good ratings and proper pricing (avoiding 6-6.5% rates). (Ajay Kumar Srivastava)
Digital & IT Spend
- Question: What is the roadmap for digital transformation? (Niteen S. Dharmawat)
- Answer: We increased the IT budget to ₹1,600 crores. We recently completed a ₹600 crore core banking modernization and established a state-of-the-art data center. (Ajay Kumar Srivastava)
Key Takeaway
Indian Overseas Bank delivered a landmark quarter with an all-time high net profit of ₹1,365 crores, marking a 56.18% YoY increase. The bank demonstrated robust operational efficiency with global NIMs expanding to 3.32% and credit growth reaching 24.13% YoY, significantly outpacing the industry. Strategically, IOB transitioned to the new tax regime and fortified its balance sheet by creating ₹2,300 crores in voluntary standard and ECL provisions. Asset quality continues to improve, with GNPA dropping to 1.54% and a slippage ratio contained at a low 0.11%. Looking ahead, management expects to maintain credit growth at 24-25% for the full year and intends to recommence dividend payments in FY27. The upcoming ₹4,000 crore QIP remains a critical watch point for capital adequacy and the reduction of the 92.44% government stake.
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