I O B — Q3 FY26 earnings call

Call held 14 Jan 2026

Management summary

Indian Overseas Bank reported a strong Q3 FY26, achieving an all-time high quarterly net profit of Rs. 1,365 crores, marking a 56.18% YoY growth. The bank demonstrated robust credit growth of 24.13% and maintained a healthy domestic CASA ratio of 41.29%. Asset quality improved significantly with Net NPA ratio falling to 0.24%, while profitability metrics like RoA and RoE also saw substantial improvements.

Highlights

  • All-time high quarterly net profit of Rs. 1,365 crores, a 56.18% YoY increase.

  • Business grew by 18.71% YoY to Rs. 6,44,276 crores for 9M FY26.

  • Gross advances increased by 24.13% YoY to Rs. 2,94,974 crores.

  • Net NPA ratio significantly reduced by 18 bps to 0.24% in December 2025 from 0.42% in December 2024.

  • Return on Equity (RoE) improved by 312 bps YoY to 20.98% from 17.86% last year.

Concerns

  • Overseas gross NPA remains elevated at around 8.5%, with recovery dependent on slow court processes.

  • Capital Adequacy Ratio (CAR) slightly decreased to 16.30% from 17.00% earlier, though still well above regulatory minimum.

Key financials

2 periods

Headline

  • Net Profit
    ₹1,365 Cr
    YoY +56.2%
  • Gross Advance
    ₹2.95L Cr
    YoY +24.1%
  • CASA Ratio
    40.9%
  • NIM
    3.3%
  • GNPA Ratio
    1.5%
  • NNPA Ratio
    0.24%
  • PCR
    97.5%
  • CAR
    16.3%
  • RoA
    1.3%
  • RoE
    21%
  • EPS
    ₹0.71
    YoY +54%

9M FY26

  • Business
    ₹6.44L Cr
    YoY +18.7%

What they filed

Q1 FY27: revenue up 18.8%, net profit up 49.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue6,851 7,112 7,634 7,386 7,849 +15%8,172 +15%8,489 +11%8,778 +19%
Net profit777 874 1,051 1,111 1,226 +58%1,365 +56%1,505 +43%1,659 +49%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Liquidity Liquidity disclosed LCR is consistently maintained around 120%-plus (127% on Dec 31, 122% yesterday). CRAR is 16.30% against mandatory 11.50%, and would be around 18.40% if 9M net profit of Rs. 3,700 crores is factored.
    We are consistently maintaining it around 120%-plus. On 31st December, it was around 127%. Yesterday, it was 122%. So, there is no issue on the aspect of liquidity. So, CD ratio is 81%. LCR is more than 121%, 122%. So, that aspect is very well taken care of and going forward also it will be maintained like this. The third part of CRAR, 16.30%. One aspect is that it is still very healthy against mandatory requirement of 11.50%. And having said that this three quarters net profit of Rs.3,700 crores is not factored into capital so far. It gets factored at the end of the year. So, if this Rs.3,700 crores we factor then this CRAR as on 31st December it is around 18.40%.

Guidance & targets

Credit Growth

  • Overall Credit Growth Credit Growth · FY26 · High confidence 24-25%
    So, maybe here we will be ending the year with a growth of around 24-25%. That is what we are also expecting

    — Ajay Kumar Srivastava, Managing Director and CEO

Asset Quality

  • GNPA Ratio Asset Quality · Q4 FY26 · Medium confidence 5-7 bps reduction
    And right now we are at 1.54% and we expect that another 5 to 7 bps it can reduce in this Q4.

    — Ajay Kumar Srivastava, Managing Director and CEO

Profitability

  • NIM Profitability · Going forward · High confidence 3.3-3.4%
    Right now, 3.32 of global NIM, I think it is comfortable, very healthy, and we intend to maintain in this range only 3.3 to 3.4 going forward also.

    — Ajay Kumar Srivastava, Managing Director and CEO

Recoveries

  • Total Recoveries Recoveries · FY26 · High confidence Rs. 4,000 crores
    So, by the year end, we will be crossing Rs.4,000 crores of recovery as planned in the beginning of the year.

    — Ajay Kumar Srivastava, Managing Director and CEO

Shareholder Returns

  • Dividend Declaration Shareholder Returns · Next financial year · High confidence Yes
    Yes, so we came out to PCA in September 2021, long back; PCA is very, very old, and next financial year, we will be in a position to give dividend, of course.

    — Ajay Kumar Srivastava, Managing Director and CEO

Capital Raising

  • QIP Completion Capital Raising · Feb/March 2026 · High confidence Rs. 4,000 crores
    We are having an approval of Rs.4,000 crores of capital raising through QIP. We have got all the approvals. And in this quarter, we are going to raise this Rs.4,000 crores, maybe February or maybe in March.

    — Ajay Kumar Srivastava, Managing Director and CEO

Government Shareholding

  • Government Shareholding Government Shareholding · March 2026 · High confidence around 88%

    Previously 96%+ → around 88%

    And if that Rs.4,000 crores, with that, this 92.44% will further get reduced by 4%. So, in one year, you can see that from last March to this March, the holding from 96%, it will come down to around 88%.

    — Ajay Kumar Srivastava, Managing Director and CEO

CASA Ratio

  • CASA Percentage CASA Ratio · Going forward · High confidence above 41%
    Cannot aspire to go beyond 45%, but we will be very successfully maintaining CASA percentage above 41%.

    — Ajay Kumar Srivastava, Managing Director and CEO

What to watch in Q4 FY26

Credit Growth Target

next quarter
Current 24.13% YoY (9M FY26)
Target 24-25% by year-end FY26

Why it matters

To assess if the bank achieves its aggressive credit growth target for the full financial year.

So, maybe here we will be ending the year with a growth of around 24-25%. That is what we are also expecting

Risks & concerns

  • Overseas Gross NPA Recovery

    medium

    Overseas gross NPA remains elevated at around 8.5%, with recovery dependent on slow court processes in foreign jurisdictions without local SARFAESI/DRT mechanisms.

    Analyst acknowledged

  • CASA Ratio Sustainability

    low

    Analyst expressed concern about YoY decline in CASA percentage, but management clarified it's a numerator/denominator effect due to faster retail term deposit growth, and domestic CASA is maintained above 41%.

    Analyst downplayed

Q&A highlights

8 direct
Credit Growth, CD Ratio, and Capital Adequacy Direct
So, maybe here we will be ending the year with a growth of around 24-25%. That is what we are also expecting... If this Rs.3,700 crores we factor then this CRAR as on 31st December it is around 18.40%.

Management clarified that high credit growth is sustainable, domestic CD ratio is manageable, and CRAR is robust, addressing concerns about liquidity and capital for future growth.

Asked by Ashok Ajmera

Provisions and Tax Regime Shift Direct
this provision whatever number you are talking, that is inclusive of around Rs.800 crores of additional standard provision which was not needed, but we have created it as a buffer. In addition to this Rs.800 crores sir, we have also done forward-looking Rs.1,500 crores in the name of ECL provision... this DTA has been made nil, and as a consequence of that sir we have new tax regime.

Management explained the composition of provisions, including buffers and ECL, and confirmed the strategic move to a new tax regime by making DTA nil, clarifying the quality of earnings and future tax implications.

Asked by Ashok Ajmera

Employee Costs and Gratuity Liabilities Direct
this Rs.175 crores does not reflect that. This reflects Rs.160 crores of additional surplus provision we have made towards pension and gratuity liabilities which was not supposed to be made but since we are having cushion available so we have made Rs.160 crores additional provision on HR regarding this. So, that is how Rs.175 crores you are looking, but actually it is Rs.15 crores increase only.

Management clarified that the reported increase in salary was largely due to proactive surplus provisioning for pension and gratuity, indicating prudent financial management rather than a significant operational cost increase.

Asked by Ashok Ajmera

NPA Write-offs and Asset Quality Outlook Direct
So, sir, technical write-off is only Rs.500 crores and it is done based on the requirements. And if you look at the recovery, so recovery we have around Rs.890 crores and recovery has been consistently we are doing more than slippages for the last many, many quarters. You talked about GNPA. GNPA has reduced. Its total of recovery plus technical write-off plus whatever OTS we have sanctioned, part of write-off has come from that plus ARC, all those things have happened. And right now we are at 1.54% and we expect that another 5 to 7 bps it can reduce in this Q4.

Management provided details on write-offs and recoveries, indicating that asset quality is well-managed and further GNPA reduction is expected, providing confidence in the bank's credit health.

Asked by Ashok Ajmera

Corporate Loan Growth Strategy Direct
You have to understand the dynamics. We are having 3,400 branches. All these 3,400 branches can do retail, Agriculture and MSME. Corporate is done by only 20 branches across geography. So, since number of branches doing retail, Agri, MSME is more, so naturally Retail, Agri, MSME happens more. And there we get good rate of interest also, risk is spread out and capital requirement is lower.

Management explained that the slower corporate loan growth is a strategic choice to prioritize higher-yielding, lower-risk RAM segments, aligning with the bank's overall business model and risk appetite.

Asked by Pinaki Banerjee

Dividend Expectation Post-PCA Exit Direct
Yes, so we came out to PCA in September 2021, long back; PCA is very, very old, and next financial year, we will be in a position to give dividend, of course.

This is a significant positive signal for shareholders, confirming the bank's return to normal capital distribution policies after exiting the PCA framework.

Asked by Pinaki Banerjee

Government Shareholding Dilution and QIP Plans Direct
We are having an approval of Rs.4,000 crores of capital raising through QIP... And if that Rs.4,000 crores, with that, this 92.44% will further get reduced by 4%. So, in one year, you can see that from last March to this March, the holding from 96%, it will come down to around 88%. And next financial year, again, we will plan and we do hope that it will reduce further as per the requirement.

Management provided a clear roadmap for diluting government shareholding to meet regulatory norms, including a specific QIP amount and timeline, which is crucial for market perception and future capital raising.

Asked by Ashok Ajmera

Digital Transformation and IT Investments Direct
So, every year expenditure on IT infrastructure goes on increasing. Last year it was Rs.1,200 crores, this year we have taken approval of board for Rs.1,600 crores, both capital and revenue expenditure, and almost 70% of that has been spent also. And a lot of regular upgradation happens in IT infrastructure. Recently, we have done the entire core banking modernization with a probable expenditure of around Rs.600 crores.

Management detailed significant ongoing investments in IT infrastructure, core banking modernization, and data centers, highlighting the bank's commitment to digital transformation and operational efficiency.

Asked by Niteen S. Dharmawat

3 min read 6 chapters

Detailed narrative

Robust Profitability and Asset Quality Improvement

Indian Overseas Bank reported an all-time high quarterly net profit of Rs. 1,365 crores for Q3 FY26, marking a significant 56.18% year-on-year increase from Rs. 874 crores in December 2024. This was supported by a strong 24.13% YoY growth in gross advances to Rs. 2,94,974 crores. The bank also demonstrated substantial asset quality improvement, with the Net NPA ratio reducing by 18 basis points to 0.24% in December 2025 from 0.42% in December 2024, and the Provision Coverage Ratio improving to 97.49% from 97.07%.

Strategic Credit Growth and Deposit Franchise

The bank's credit growth is projected to reach 24-25% by the end of FY26, driven primarily by the Retail, Agriculture, and MSME (RAM) sectors, which constitute 75-76% of the total portfolio. Management emphasized a deliberate strategy to focus on RAM due to better interest rates, diversified risk, and lower capital requirements, with corporate lending being selective. The domestic CASA ratio stood at a healthy 41.29%, with the bank committed to maintaining it above 41%, despite faster growth in retail term deposits (16% YoY) and SB deposits (>11% YoY).

Capital Adequacy and Future Capital Plans

The Capital Adequacy Ratio (CAR) was reported at 16.30%, comfortably above the regulatory minimum of 11.50%. Management indicated that if the nine-month net profit of Rs. 3,700 crores were factored into capital, the CAR would rise to approximately 18.40%. Furthermore, the bank is in the process of raising Rs. 4,000 crores through a QIP, expected to be completed by February or March 2026. This QIP is projected to reduce government shareholding by another 4%, bringing the total from 96%+ in March 2025 to around 88% by March 2026, with plans for further dilution in the next financial year.

Proactive Provisioning and Tax Strategy

The bank made significant provisions this quarter, including Rs. 800 crores as an additional standard provision buffer and Rs. 1,500 crores for ECL. A notable change was the write-off of Deferred Tax Assets (DTA) amounting to Rs. 2,900 crores, enabling the bank to move to a new tax regime, which is expected to yield future benefits. Additionally, Rs. 160 crores was set aside as surplus provision for pension and gratuity liabilities, contributing to the Rs. 175 crores increase in employee costs, reflecting a prudent approach to employee-related obligations.

Digital Transformation and Operational Efficiency

Indian Overseas Bank is heavily investing in its IT infrastructure, with an approved expenditure of Rs. 1,600 crores for the current year, of which 70% has already been spent. Key initiatives include core banking modernization (costing Rs. 600 crores), establishment of a state-of-the-art data center, and upgrades to core network and branch infrastructure. These investments are aimed at enhancing operational efficiency, improving customer experience, and strengthening the bank's competitive position, with IT infrastructure being a top priority.

Dividend Outlook and Shareholder Returns

Having exited the Prompt Corrective Action (PCA) framework in September 2021, the bank's management expressed confidence in being able to declare dividends in the next financial year. This signals a return to normal capital distribution policies and is a positive development for shareholders, reflecting the bank's improved financial health and sustained profitability. The bank's Return on Equity (RoE) also saw a significant increase of 312 basis points year-on-year, reaching 20.98%.

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