Indian Overseas Bank (IOB) on Thursday posted a 24% year-on-year increase in its standalone net profit at Rs 777 crore for the second quarter, driven by a strong growth in interest income.
The state-owned lender’s interest income grew by 18% y-o-y to Rs 6,851 crore. The bank’s net interest income grew by 8.14% y-o-y to Rs 2,537 crore in Q2, while other income saw a sharp 46.59% increase to Rs 1,633 crore.
Addressing the company’s Q2FY25 earnings press conference, MD & CEO Ajay Kumar Srivastava said the bank has been consistently recording over 24% growth in profits quarter after quarter.
He credited the double-digit profit growth to a mix of higher interest income, non-interest income in the form of recoveries from technical write-off, and cost-saving measures, including a focus on low-cost CASA deposits.
Total business of IOB grew by 12.20% y-oy to Rs 5,40,801 crore as of the quarter ended September. Of these, deposits saw a 13.75% y-o-y increase to Rs 3,10,652 crore while gross advances rose by 10.16% to Rs 2.30 lakh crore. Cost of deposits went up from 4.74% in Q2FY24 to 5.19% in Q2FY25. Srivastava attributed this to special deposit schemes that the bank launched last year to mobilise deposits to match the fast-growing credit.
He noted that the entire banking industry is struggling to source low-cost CASA deposits. The CASA deposits as a percentage of IOB’s total deposits slipped to 42.44 in September 2024 against 43.65% in the year-ago quarter. “At no point of time, we have gone below 42%, which is one of the highest in the system,” Srivastava said.
CASA and retail term deposits account for 94% of IOB’s total deposits, while the remaining 5-6% comes from bulk deposits.
On the advances side, retail, agriculture and MSME (RAM) loan book accounted for 70% of IOB’s total advances of Rs 2.30 lakh crore as of September, while the rest came from corporate loan books. Srivastava said banks will keep RAM exposure under 70% of the global advances and will increase the share of corporate loans. “Overall, we are targeting 12-13% credit growth this year,” he added.
The bank’s credit-to-deposit (CD) ratio stood at 74.09% in Q2. “Deposit growth will happen but credit growth is also our priority. So, we have set a CD ratio target of 77%,” he said.
The bank’s asset quality showed a marked improvement with gross non performing asset (GNPA) as a percentage of gross advances coming down to 2.72% as of September 2024 compared to 4.74% in the corresponding quarter of the previous fiscal. The net non-performing assets also improved to 0.47% from 0.68% during this period.
The bank made a recovery of Rs 1,482 crore against a fresh slippage of Rs 251 crore during Q2FY25. “Noteworthy is that Rs 1,118 crore or more than 75% of the recovery came from technically written off accounts,” he said, adding that the bank’s recovery has been exceeding the fresh slippages quarter after quarter.
“For the full year, we have a target of recovering Rs 5,500 crore and we are pretty confident that we are going to surpass that target,” Srivastava added.