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Business Standard

IOB Q1 net up 76% at ₹1,111 cr, eyes QIP for ₹4,000 cr equity in Q3FY26

Chennai-based Indian Overseas Bank (IOB) has posted a 75.57 per cent Year on Year (YoY) increase in net profit to Rs 1,111 crore for the first quarter ended June 2025 (Q1FY26), driven by steady interest income and the sale of priority sector lending certificates (PSLCs). The lender is planning to raise up to Rs 4,000 crore through a Qualified Institutional Placement (QIP) in the third quarter of the current financial year to dilute government shareholding. Net Interest Income (NII) rose by 12.5 per cent YoY to Rs 2,746 crore, while the net interest margin (NIM) moderated to 3.04 per cent in the reporting quarter from 3.06 per cent in Q1FY25. Non-interest income rose by 43.37 per cent YoY to Rs 1,481 crore in Q1FY26. Ajay Kumar Srivastava, Managing Director and Chief Executive, IOB, said, 'Besides steady growth in Net Interest Income (NII), control on expenses and the sale of PSLCs helped in improving profit after tax.' NIM may take a hit of 5-10 basis points in the near term due to the immediate impact of lending rate cuts following the policy repo rate reduction by the RBI. The deposit rate cut by the lender will impact margins with a lag. NIM is expected to return to a level of 3.25 per cent by Q4FY26, Srivastava said in a post-earnings media interaction. Advances grew by 14.05 per cent YoY to Rs 2.62 trillion. The state-owned bank is focusing on retail, agriculture, and MSME segments, while demand from the corporate segment remains subdued. The bank expects credit to grow by 12-13 per cent YoY in the current financial year, Srivastava added. Total deposits increased by 10.75 per cent YoY to Rs 3.3 trillion. The share of low-cost deposits—current account and savings account (CASA)—stood at 43.78 per cent at the end of June 2025, up from 42.17 per cent a year ago. The lender has guided for 10 per cent growth in overall deposits in FY26. The bank has board approval to raise up to Rs 10,000 crore through infrastructure bonds, which are exempt from meeting the Cash Reserve Ratio and Statutory Ratios. The bank's asset quality improved, with gross NPAs declining to 1.97 per cent in June 2025 from 2.89 per cent in June 2024. Net NPAs also declined from 0.32 per cent in June 2024 to 0.51 per cent in June 2025. The bank's capital adequacy stood at 18.28 per cent, with Common Equity Tier-1 capital at 15.78 per cent at the end of June 2025. IOB plans to raise up to Rs 4,000 crore in equity capital through a QIP in the third quarter, depending on market conditions. This QIP is expected to reduce government holding from 94 per cent to 90 per cent, Srivastava said.