Indian Overseas Bank (IOB) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the earnings conference call of Indian Overseas Bank arranged by Veritas Reputation. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sonali Pandey from Veritas Reputation PR. Thank you, and over to you, Ms. Ms. Pandey.

Thank you. Good evening, and welcome to Indian Overseas Bank conference call to discuss our financial results for quarter 1 FY '26-'27 ended June 30, 2026. Indian Overseas Bank, IOB, headquartered in Chennai continues to strengthen its presence with over 3,522 branches with around 3,691 ATMs and 14,401 business correspondents across India. IOB also provides services in 4 countries: Singapore, Hong Kong, Thailand and Sri Lanka, with a trust of 46-plus million total customers in banks fold. Our comprehensive suite of services spans personal, corporate and agricultural banking, along with credit cards, loans and insurance products. Our financial results are available on our website and stock exchange platforms. Before we proceed, please note that today's discussion may include forward-looking statements subject to risks and uncertainties that could impact future outcomes. We encourage you to consider these factors when evaluating our performance. Joining us today are Shri Ajay Kumar Srivastava, Managing Director and CEO; Mr. Joydeep Gupta Roy, Executive Director; Mr. Dhanraj T., Executive Director. We will begin with an overview of our quarter 1 performance followed by a Q&A session. Now I invite Mr. Raghuram Mallela, Company Secretary, Indian Overseas Bank to present the financial highlights. Over to you, sir.

Thank you, Sonali. Good evening, all. I am pleased to present an overview of bank's performance during the quarter ended 30th June 2026. It's a proud moment for the bank today that the bank has reached a new milestone by achieving an all-time high quarterly net profit of INR 1,659 crores for this quarter as compared to INR 1,111 crores as on June 25 with 49.32% year-on-year increase. Bank has achieved the operating profit of INR 2,693 crores, registering a year-on-year growth of 14.21%. Regarding the performance of the bank for the quarter ended 30 June 2026, bank has achieved a business mix of INR 698,375 crores, recording a year-on-year growth over 17.72%. CASA in absolute terms stood at INR 154,415 crores, with year-on-year growth rate of 6.61%. CASA ratio domestic as on June 2026 stood at 41.45%. CASA Global stood at 41.05%. Total deposits reached INR 376,193 crores as on 30 June 2026 with a year-on-year growth rate of 13.72%. Total advances increased year-on-year by 22.75%, reaching crores as against INR 262,421 crores as of 30th June 2025. Provision coverage ratio improved to 97.67% as on 30 June 2026 as compared to 97.47% as on 30 June 2025. Capital adequacy ratio stood at 19.36% as against the regulatory requirement of 11.50%. Net interest margin global for the quarter ended 30 June 2026, is 3.37% with an increase of 12 bps as compared to 3.25% as of the last quarter March 2026. Net interest margin domestic stood at 3.48% for the quarter ended June 2026 as compared to 3.35% for the quarter ended March 2026. With regard to the NPA management, GNPA, gross NPA reduced from INR 5,178 crores to INR 4,292 crores year-on-year risk. Net NPA reduced from INR 816 crores to INR 588 crores. GNPA percentage has reduced by 64 bps year-on-year from 1.97% as on June 2025 and reached 1.33% as on June 2026. Similarly, net NPA percentage has also been reduced by 14 bps year-on-year from 0.32% as on June 2025, and it stood at 0.18% as on June 2026. Slippage ratio of the bank is reduced to 0.06% for the quarter ended June 2026 as against 0.10% as on June 2025. And with respect to the valuations, there is a significant improvement in return on assets, which stood at 1.41% for the quarter ended June 2026, with 27 bps increase as compared to June 2025. With regard to book value per share, it improved to INR 15.79 for June 2026 when compared to 12.41% for June 2025. Similarly, improvement is evidenced in return on equity with 369 bps year-on-year. Currently, return on equity stood at 22.6% when compared to 19th of June 2025. Earnings per share for June 2026 is 0.86 which improved from 0.58 as on June 2025. This is all about the financial performance of the bank for the quarter ended 30 June 2026. Thank you.

[Operator Instructions] The first question is from the line of Mr. Ashok Ajmera from Ajcon Global.

Complements, Srivastava, Joydeepji, and Dhanarajji and the entire team of the Indian Overseas Bank for the fantastic results for even Q1 '27. And you are just a [indiscernible] away from INR 7 lakh crore business, which will be achieved soon or might have already been achieved by now. And probably when that you made all the -- I mean, [indiscernible] of the targets which are given and even in the current quarter also, there is a good credit growth of 3.77%, an overall annualized base is 22.75%, which is commendable. Having said this, sir, I've got a couple of observations and some questions. In the profitability, which is one of the highest [indiscernible] net profit, as was told just now INR 1,659 crores. [indiscernible] profit is also good at almost about INR 2,700 crores. There is a major component of PSLC commission of INR 863 crores and good recovery. I mean reasonably good recovery of written-off account of also almost about INR 490 crores. Fee based income has also gone up. So this PCLC and equally in the investment in the treasury book also the profitability is there. So that is the major contributor of the -- this profit in this quarter. So going forward, can you give some color of the -- I mean how are we going to close this FY '27 as far as the profitability is concerned, whether the consistency will remain there in spite of these -- some of these factors which may not be materialized in the coming quarters.

Thank you so much. The [indiscernible] are sitting with me along my with my team. So regarding this profitability, say, you need to look at NII also, interest income and expenses. So NII, we have grown by 34.3% year-on-year. So that itself is showing that out of operations, the lending activity and whatever we are doing on liabilities, but the NII growth is one major part of driving profitability. And in addition to this, you talked about PSLC and recovery from technical return of account. These are booking activity. Every quarter, it happens if you remember earlier also the same type of [indiscernible] there that whether this PSLC income or recovery from technical return of account will continue going forward also. In fact, if you look at last 8 to 9 quarters numbers, these 2 parameters are there in all quarters. PSLC sale income. And so this is part of the -- what I'm trying to convey that this is part of the -- this is part of the -- integral part of noninterest income. And that will continue, of course, it is stable, and it will continue going forward also. NII, of course, interest income is increasing quarter-on-quarter, year-on-year. So going forward, I do not see any challenge in maintaining this profitability. On last 10 quarters, if you see the trend of operating profit and net profit quarter-on-quarter is only one dimensional, that is increasing.

Hello?

Yes, please. Yes, please go ahead.

Sir, now -- this -- on the credit front, also this quarter has been good for almost every bank. Suddenly, a lot of demand has emerged and there was some clarity in between all this [indiscernible] war also, again, that conflict started again. So now going forward, number one, on the ECLGS, how much was [indiscernible] whether that -- have you started seeing now any pressure again coming back to the smaller accounts or SME accounts on the recovery front or on the delinquency front? And what are the numbers of the ECLGS -- if we can know that how much -- how many people have already availed it, how is much of the amount of disbursement?

Yes. So ECLGS total universe from IOB side, whatever number of eligible accounts and amount is there, is at around INR 4,400 crores. And out of that, we have so far disbursed around INR 2,600 crores based on the requirement of the individual borrowers and in terms of ECLGS 5 requirement. The INR 2,600 crores, you already done INR 1,800 crores is expected to be done over the next 1, 1.5 months. And demand is there, request is there. We have pretty show that 95% to 100% of ECLGS disbursement will certainly take place by August or September first week. And regarding [indiscernible] on any small borrowers or SME accounts. So we have not seen individual cases are there. But as one product or one sector that this particular product or sector is struggling because of the [indiscernible] prices. Earlier also, there was no subside. And right now also, we are not observing anything of that type.

Okay, sir. I will take other. Now on the ECL front, how are we prepared? I mean are we continuing the same what was there in the last quarter? That we will be in a position -- I mean the impact may not be that sizable, and we will be able to take care of it without taking the benefit of those 4 years or so on the ECL? What is the total buffer provisioning on that, sir?

So the same strategy continues. Our initial assessment or internal assessment, I will say, it is to a tune of INR 3,000 crores of additional requirement. Till March, we created a forward-looking provision for ECL only INR 1,700 crores. This is the balance sheet we have added INR 400 crores additional. So against INR 3,000 crores of provable requirement, we have provided already INR 2,150 crores to meet this ECL provision requirement. And in coming quarters also, we will be equally making a provision going forward so that by the end of this financial year, the entire requirement of ECLGS can be taken care of in one shot. And as part of our internal discussion, we do not intend to go for the dispensation.

Very encouraging, sir. Sir, last question in this -- rather a data point, in our net worth, which has gone to INR 29,256 crore in this quarter from INR 28,114 crores, there is an addition -- in addition to the profit, there is an addition of INR 554 crores in the net worth. So is it because of the AFS, some addition in the results because of the revaluation? I mean, because of the valuation of the -- or the profit of the AFS book or some other components if they're in this INR 550-some crores DTA or some other things? If you can...

DTA, we have around INR 400 crores. Yes, sorry, about INR 200 crores.

Sorry, sorry, I couldn't hear, sir. DTA?

DTA we have [indiscernible]. That reversal has happened plus 1 or 2 minor [indiscernible]. Nothing substantial, sir.

AFS, any addition to that?

So the MTN addition is there around INR 300 crores.

That is there.

That is also there in the books, sir, yes.

And the results on the....

[indiscernible] negative impact of INR 500 crores.

That come in the positive now?

Yes, yes. MTN is positive now, yes, by around INR 300 crores.

That's a very good, sir. Just last question going from this down. Sir, your NIM is very good and increasing also. And one thing is that whether the consistent -- it can be maintained in the remaining 3 quarters? And second one, sir, somehow I couldn't find out the numbers, SMA 12 -- 012 or SMA above INR 5 crores, either I have missed the slide or -- so can you give some color on that, sir?

Yes, SMA is around 4% total SMA. SMA 01 and 2, I will give you separately the numbers. But total SMA is around 4%. And it is coming down because one month before it was 4.95%. We are paying attention to that. And the first question was about NIM. The NIM, sir, last one year, if you see, we have been successfully maintaining NIM between 3.3% to 3.4%. Earlier also, we gave the same guidance that it will be maintained at that range. And for June number, if you see our domestic NIM it has gone to 3.48%. So we are pretty sure that going forward also, sir, NIM will be in this range around 3.3% to 3.4% in this range, it will move. On SMA numbers, right now, we are having -- so I can tell you SMA 0 is around 1.78%, SMA 1 is 0.95%.

Sir, can you give an absolute number, sir?

Absolute numbers, yes, of course. SMA 0 is INR 5,743 crores. SMA 1 is INR 368 crores. And SMA 2 is INR 4,246 crores. So total SMA is INR 13,000 crores, percentage terms, it is 4.05%.

Sir, I don't remember exactly, but I think it's -- SMA2 numbers have a little bit increased in this quarter. Isn't it?

SMA 2 as on March was INR 3,646 crores.

So around INR 600 crores, INR 700 crores increase is there.

INR 600 crores, it does increase, yes. But if you look at percentage terms, March '26 was [indiscernible]. So INR 500 cores increase over March.

So any concern or it is already -- I mean, regular -- hello? Hello? Hello?

Mr. Ajmera, may we request to please stay connected. We have the management line with us.

Yes, I realize, line went off, I think. Is it on now?

Ladies and gentleman, we have the management line disconnected. Please stay connected while we reconnect the management.

SMA-2 has increased by INR 500 crores over [indiscernible], that is correct. For total SMA, it has come down by INR 2,200 crores.

Yes, sir. So any concern on that, sir, the SMA 2 numbers increasing? Or they are now regularized by now?

Mostly, it has regularized. If you look at our slippage ratio if you map that with SMA, you can see that slippage ratio is 0.06 for June. March, it was 0...

Yes, it is substantial. It is almost 50% of March. No, what I want to know, is there any government guaranteed account or anything out of this INR 4,246 crores or they all small...

Part of that -- not government guaranteed, sir, I will say that [indiscernible] coverage or [indiscernible] coverage for the smaller accounts will be there. But nothing alarming us. Slippage for last 10 quarters has been around 0.10 to 0.12. Asset-wise, quality-wise, we are absolutely 100% sure, sir.

Very good performance, all the best to you. I think a lot of other people are in the queue. So I'll [indiscernible] here. And if time permits, I'll come back again.

[Operator Instructions] The next question is from the line of Vimal Panchal from Vimal Panchal and Associates.

My Vimal Panchal. You have approval of INR 5,000 crores equity raising plans. So what is the -- which way are we planning [indiscernible] with the government making [indiscernible] which way we are looking? And this INR 5,000 crores, are we planning in one shot or [indiscernible].

So it is true that INR 5,000 crores of capital lending plan has been approved by the Board. And we are in the process of obtaining all other strategy approval before hitting the market. And we expect that in this quarter, it will happen. So maybe in Q3 or Q4, depending on the market conditions, we will go to the market maybe in 1 or 2 or maybe more than 2 tranches also.

And that matter [indiscernible]

It will be QIP.

[Operator Instructions] The next question is from the line of Ashlesh Sonje from Kotak Securities.

Sir, a few questions from my side. Firstly, if I look at the yield, yield on advances has gone up by about 10 basis points Q-o-Q. If you can just explain what is happening? And along with that, if you can also share what has happened on the corporate -- what is the strategy on the corporate loan book because that has declined 10% Q-o-Q?

Yield on advances has increased because of a pricing issue, of course. And about 54% of the credit portfolio is linked to [indiscernible] and 37% to [indiscernible] and because of good quality lending at reasonable pricing, yield on advances has increased. The corporate book, so I will say that there is a pipeline of around INR 14,000 crores already sanctioned and in different stages of disbursement. And we expect that corporate loan book also by the end of this year will grow by 12% to 13%.

Understood, sir. Sir, but when you say the yield has gone up because of better pricing, can you elaborate a bit more which segments you are seeing this exactly? And what is the response from the borrowers?

See, 80% of the portfolio is RAM, retail, agriculture, MSME. So this all is coming from everywhere. Retail, agri, MSME are part of it is coming from corporate also. So it's not only one area of product specific. It is uniformly spread across.

Sir, is it fair to -- is my interpretation right that yield has gone up across all segments? Or you are saying there is something else?

Yes, more or less, yes.

Okay. Okay. Sir, and the corporate advances, which have declined 10%, would you have a sense of where the borrowers are going? Are they going back to the bond market or they are going to some other bank?

See, for IOB the 10% decline is because of one bigger account, around -- amounting to around INR 10,000 crores, which we, in the first month of this financial year in the month of April itself, since pricing was not matching. So we came out of that arena. And this corporate loan book of 10% decrease is because of that. It's not the INR 10,000 crores of impact was more but around 40% of that we covered in the quarter 1. And after coverage of 40% of corporate loan book, 10% negative growth is visible, which, of course, in this quarter will be covered. And as I said, by the end of the financial year, we'll be showing a growth of 12% to 13%. Having said that, if you look at the total overall credit growth, so year-on-year, we have grown by around 22%. And quarter-on-quarter also, I think we have grown by 4%.

Understood, sir. Sir, is it possible to share which sector this exposure belong to, this INR 10,000 crores exposure?

It was corporate, government account.

Sir, secondly, the cost of deposits has also improved. It has declined by about 10 basis points Q-o-Q. Can you explain what has happened there as well?

We have focused on CASA very aggressively. And we -- despite a 13% or 14% growth in total deposits and 18% growth -- 17% growth in the retail term deposit, we have been able to maintain CASA of 41% on a consistent basis. And that is the only reason how cost of deposit has come down. We are not very aggressive in the high rate of interest [indiscernible]. All along, we maintain around 6% to 7% [indiscernible] out of total deposit of the bank. And that is strategy that focusing on CASA and not too much of reliance on [indiscernible]. So combined impact of these 3, 4 strategies has resulted in reduction in cost of deposit.

Sir, one follow-up on that one. Is there any part of your term deposits, which is yet to still reprice downward or all the repricing is already complete now?

All the pricing done, already done [indiscernible].

Okay. Understood, sir. And thirdly, if I look at the fee income for the quarter, it has grown quite handsomely about 20% Y-o-Y, is this something -- can you just explain what has happened here? The growth is quite good.

Yes, 2 major components are: one is PSLC commission, second is the sale on retail term deposits, third is processing fee, plus all other usual charges.

Sir, if I look at the presentation, I'm talking about this component, which was INR 476 crores, so the PSLC income is sitting outside that number.

Let me let you see the number.

What you call exchange and commission, that number.

Exchange and commission, that is INR 90 crores you are talking?

It shows, it's INR 476 crores here.

INR 476 crores will be normal exchange and commission [indiscernible] commission, non-fund business plus locker rents, plus all other charges, demand drops.