Indian Overseas Bank’s (IOB) net profit rose 76% year-on-year to Rs 1,111 crore in the April-June quarter due to a fall in provisions and growth in other income.
The bank’s other income grew by 43.4% y-o-y as the bank sold priority sector lending certificates worth Rs 200 crore and also recovered Rs 500 crore from written-off accounts. Sequentially, however, other income fell over 6%.
Net interest income rose 13% on-year to Rs 2,746 crore. However, on a sequential basis, it fell by 12%. Net interest margin (NIM) moderated to 3.04% in April-June from 3.56% a quarter ago. Due to the RBI repo rate cuts of 100 basis points since February, the bank expects a 5-10 bps hit on NIM in the next quarter, but is hopeful that after Q4, NIM will be at 3.25%.
Fundraising, expansion, and growth outlook
The bank said it has got board approval to raise Rs 4,000 crore. “Mostly, it will be a QIP but depending on the market situation and response, we can take certain other routes also,” managing director and chief executive officer AK Srivastava said on the post-earnings call. He added that it could be in one or more tranches. With this QIP, government holding in the bank will come down to 90% from 94.81% currently, he said.
Srivastava also said that the bank has approval to raise Rs 10,000 crore through infrastructure bonds, but they will come to the market only when conditions are conducive.
The bank’s global advances grew 14.05% y-o-y to Rs 2.62 lakh crore as on June 30, and deposits grew by 10.75% to Rs 3.31 lakh crore. On the lending front, the demand from the corporate segment has remained muted. Corporate book fell by over 11% y-o-y during the quarter, while the retail book rose nearly 39%.
On deposits, the bank said that maintaining a current account, savings account (CASA) ratio of 43.78% is a major challenge. They are aggressively onboarding new CASA customers. The bank expects loan growth at 12-13% and deposit growth at 10% in the current financial year.
Asset quality and provisioning update
Asset quality improved with the gross non-performing asset (NPA) ratio at 1.97% as on June 30 from 2.14% a quarter ago and the net NPA ratio at 0.32% from 0.37% a quarter ago.
Provisions fell by 10% y-o-y and 20% sequentially to Rs 844 crore in the June quarter. According to the notes in the financial results, the bank holds Covid-19 related provision as contingency provision amounting to Rs 1,692.74 crore as on June 30 and the provision coverage ratio stood at 97.47%.
Srivastava also said the bank is in the process of getting approval for opening a branch at GIFT City. “We are in the process of getting approval and depending on the approval, we will be going for opening a branch. It is in our priorities that we want to open a branch as early as possible,” he added.