I O B — Q4 FY25 earnings call

Call held 2 May 2025

Management summary

Indian Overseas Bank delivered a strong Q4 and full-year FY25 performance, achieving its highest ever quarterly net profit of ₹1,051 crores. The bank demonstrated robust credit and deposit growth, coupled with significant improvements in asset quality, with Net NPA falling to 0.37% and RoA surpassing 1%. While a large corporate account led to increased slippages, management expressed confidence in its resolution and continued growth trajectory, supported by a strong capital base and strategic initiatives.

Highlights

  • Net Profit for Q4 FY25 was ₹1,051 crores, the highest in the bank's history, and full-year net profit was ₹3,335 crores, up 25.56% YoY.

  • Gross advances grew by 14.15% YoY to ₹2,50,019 crores, and total deposits grew by 9.11% YoY to ₹3,11,939 crores.

  • Net NPA reduced to 0.37% from 0.56% last year, and PCR increased to 97.30% from 96.85% last year.

  • Capital Adequacy Ratio (CAR) is robust at 19.74%, significantly exceeding the 11.50% mandatory requirement.

  • Return on Asset (RoA) reached 1.12%, crossing the 1% mark for the first time, and Return on Equity (RoE) inched up to 16.28%.

Concerns

  • Fresh slippages increased to ₹3,568 crores in Q4 FY25, primarily due to a single large corporate account (MTNL) of ₹2,332 crores becoming NPA.

  • Disputed tax liabilities remain substantial at ₹5,933 crores, despite a reduction from ₹9,700 crores due to successful appeals.

  • Other operating costs increased by ₹200 crores QoQ, attributed to staff provision adjustments, with further details pending.

Key financials

4 periods

Headline

  • Business Mix
    ₹5.61L Cr
    YoY +11.3%
  • Total Deposit
    ₹3.12L Cr
    YoY +9.1%
  • Gross Advance
    ₹2.50L Cr
    YoY +14.1%
  • Operating Profit
    ₹8,688 Cr
    YoY +28.4%
  • CASA
    ₹1.36L Cr
    YoY +8.5%
  • PCR
    97.3%
  • CAR
    19.7%
  • Total Income
    ₹33,636 Cr
    YoY +13.4%
  • Cost of Deposit
    5.1%
  • Yield on Investment
    6.8%
  • Yield on Advances
    8.8%
  • RoA
    1.1%
  • RoE
    16.3%
  • Gross NPA
    ₹5,348 Cr
  • Net NPA
    ₹912 Cr
  • Net NPA %
    0.37%
  • Disputed Tax Liability (current)
    ₹5,933 Cr

Q4 FY25

  • Net Profit
    ₹1,051 Cr
  • NII
    ₹3,123 Cr
    YoY +13%
  • Cost-to-Income Ratio
    44.4%
  • MTNL NPA
    ₹2,332 Cr
  • PSLC Sale
    ₹287 Cr

FY25

  • Net Profit
    ₹3,335 Cr
    YoY +25.6%
  • Cost-to-Income Ratio
    47.1%
  • Total Recovery from NPA
    ₹4,014 Cr

FY25 ex-MTNL

  • Fresh Slippages
    ₹1,200 Cr

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 The bank raised ₹1,400 crores through a QIP process in February, reducing Government of India shareholding from 96% to 94%. This capital raise was primarily to comply with SEBI minimum shareholding guidelines, not for growth capital, as the CRAR of 19.74% is sufficient for 3 years of credit growth.
    Capital adequacy ratio due to that we had gone for QIP, first we had generated INR1,437 crores. So this has increased to 19.74% as against the 11.50% mandatory requirement from the earlier. ... The fact is that the Government of India shareholding is was 96% in the bank. And in the month of February, we raised INR1,400 crores of capital through QIP process, and that reduced Government of India shareholding to 94%. And going forward, to comply with the SEBI guideline of minimum shareholding, we are raising capital from the market to bring down Government of India shareholding further. That is the objective.

Guidance & targets

Credit Growth

  • Credit Growth Credit Growth · FY26 · High confidence 14% to 15%
    Sir, credit growth for this year also, we would like to grow at around 14% to 15%. That will continue.

    — Ajay Srivastava

Deposit Growth

  • Deposit Growth Deposit Growth · FY26 · High confidence 12% to 13%
    We have got our strategy in place and our plan is to grow deposit to the tune of 12% to 13% in this financial year.

    — Ajay Srivastava

Branch Expansion

  • New Branches Branch Expansion · FY26 · Medium confidence above 100
    And this year also, the guideline -- the guidance is that we will try to open new branches at new centers, which should be matching to this number above any -- it can be any number above 100.

    — Ajay Srivastava

Profitability

  • Cost-to-Income Ratio Profitability · by end of FY26 · High confidence around 42%

    From 44% today

    And going forward, since income is increasing, we are expecting to maintain it at around 44% or maybe 100 or 200 bps lower than that, around 42% by the end of this year.

    — Ajay Srivastava

  • RoA Profitability · by end of FY26 · Medium confidence improve further by a few basis points

    From 1.12% today

    ROA this quarter, we crossed 1%. So we are standing at 1.12%. And going forward, the plan is to improve it further. ... And by the end of this financial year, we'll try to improve it by an additional some few basis points.

    — Ajay Srivastava

  • International Book NIM Profitability · FY26 · High confidence 3.42% to 3.43%
    International, there will be an impact of around 8 to 10 bps only. ... 3.42% to 3.43%, yes, around that, yes, almost.

    — Ajay Srivastava

Asset Quality

  • NPA Recovery Asset Quality · FY26 · High confidence around INR4,500 crores
    For this year, our recovery target is around INR4,500 crores for the entire year.

    — Ajay Srivastava

Technology

  • IT Budget Technology · FY26 · High confidence INR1,700 crores plus

    From INR1,200-1,400 crores today

    This year, we have got the budget approved from the Board amounting to INR1,700 crores plus.

    — Ajay Srivastava

Taxation

  • Shift to New Tax Regime Taxation · FY26 · High confidence last quarter of this financial year
    We will be maybe last quarter of this financial year. In this year, we will be shifting to new tax regime.

    — Ajay Srivastava

Market context

  • Global NIM Profitability · year-end · High confidence around 3.50%
    NIM, we are looking at maintaining at around 3.50%. There will be some pressure. And I think around 3.5% we'll be able to maintain at year-end.

    — Ajay Srivastava

What to watch in Q1 FY26

MTNL Account Resolution

next quarter
Current ₹2,332 crores NPA, 100% provisioned
Target Resolution achieved or significant progress reported

Why it matters

Resolution of this large NPA is crucial for asset quality and recovery outlook.

Sir, discussions are happening amongst Ministry official, sir. Some resolution we are expecting in this quarter. And hopefully, we will get our entire money back.

Risks & concerns

  • MTNL Account Becoming NPA

    medium

    A large corporate account of ₹2,332 crores from MTNL became NPA in Q4 FY25, leading to a spike in fresh slippages, though 100% provision has been made and resolution is expected.

    So, INR2,332 crores of MTNL account became NPA in February this year in Q4. And because of that only total slippages has gone up to INR3,568 crores... Sir, discussions are happening amongst Ministry official, sir. Some resolution we are expecting in this quarter. And hopefully, we will get our entire money back.

    Management acknowledged

  • Outstanding Disputed Tax Liabilities

    medium

    Despite a reduction, ₹5,933 crores in disputed tax liabilities (income tax, service tax, GST) remain outstanding, though management is highly confident of full resolution through appeals.

    There is a huge disputed tax liability of INR4,062 crores and plus there is income tax and service tax INR265 crores and GST, INR1,615 crores. So where do we stand today? ... And we are 100% sure that this for remaining amount also, we are going to get the giving effect orders and liability against this will not arise.

    Analyst confident of resolution

  • NIM Compression from Rate Cuts

    medium

    The 25 bps reduction in lending rates due to RBI repo rate cuts will impact interest income, but management plans to mitigate this through focus on MCLR/base rate loans and expected moderation in deposit rates.

    So rate reduction happened because repo rate was reduced by RBI. ... So of course, the interest income will get impacted. So there are two ways to cover it and which we are doing. One thing is that the other 50% of the lending is on MCLR and base rate. ... And second thing is that since repo rate is going down, inflation is under control, so deposit rate will also get moderated. So deposit rate will also be reduced and accordingly, the loss will be offset.

    Analyst mitigated

Q&A highlights

4 direct
Fresh Slippages and MTNL Account Direct
In fact, all along, we have been consistently maintaining slippage ratio around 0.15%, 0.16%, 0.17%. This quarter also, we always maintained it, but one account of MTNL that is already there in the public domain, all of you know that. So, INR2,332 crores of MTNL account became NPA in February this year in Q4. And because of that only total slippages has gone up to INR3,568 crores, sir. If you take that out, then total slippage for the entire year is INR1,200 crores only, which is lower than the previous year slippage of INR1,500 crores.

Clarifies the primary reason for the spike in fresh slippages and provides context on the underlying asset quality trend excluding the one-off MTNL account.

Asked by Ashok Ajmera

Disputed Tax Liability Resolution Direct
So from INR9,700 crores, it has come down to INR5,900 crores as on date. Why I'm giving -- sharing these numbers with you is that the appeal which I made against the claim by the respective authorities, our appeal and our justification has been accepted by the appellate authority. And as a result of that, only INR4,402 crores of giving effect orders came to us and the disputed tax liability has come down to INR5,933 crores. So depending on the demand and nature of demand and our conviction that these demands are not justified, we have gone for appeal. And we are 100% sure that this for remaining amount also, we are going to get the giving effect orders and liability against this will not arise.

Provides an update on the significant reduction in disputed tax liabilities and management's strong confidence in resolving the remaining amount, which is a key auditor's note.

Asked by Ashok Ajmera

Rationale for Capital Raise (QIP) Direct
Yes. You are absolutely right that we do not need capital as well as growth capital is concerned. Our CRAR is at 19.74%. And this CRAR can take care of our 3 years credit growth comfortably. So for CRAR purpose, we do not need capital that is very true. The fact is that the Government of India shareholding is was 96% in the bank. And in the month of February, we raised INR1,400 crores of capital through QIP process, and that reduced Government of India shareholding to 94%. And going forward, to comply with the SEBI guideline of minimum shareholding, we are raising capital from the market to bring down Government of India shareholding further. That is the objective.

Clarifies that the recent QIP was driven by SEBI's minimum public shareholding norms rather than an immediate need for growth capital, addressing potential investor concerns about dilution.

Asked by Rajakumar Vaidyanathan

Impact of Lending Rate Reduction on NIM Partial
So rate reduction happened because repo rate was reduced by RBI. And as a policy as per guideline, all retail and MSME products of all banks are linked to repo. So whenever repo gets reduced by the regulator, the automatic transmission happens. ... Second part is that how we are going to mitigate this. So of course, the interest income will get impacted. So there are two ways to cover it and which we are doing. One thing is that the other 50% of the lending is on MCLR and base rate. So those accounts which can be covered under MCLR, we are focusing on that part so that this loss can be covered. And second thing is that since repo rate is going down, inflation is under control, so deposit rate will also get moderated. So deposit rate will also be reduced and accordingly, the loss will be offset.

Explains the reasons for the 25 bps RLR cut and outlines the bank's strategy to mitigate the impact on NIM through a focus on MCLR/base rate linked loans and expected moderation in deposit rates.

Asked by Aryan Rana

Increase in Other Operating Costs Partial
We'll get back. In fact, readily is not available, but other operating includes the staff expansion and a major part of this has come from that only, but we will come back to you.

Highlights a significant QoQ increase in other operating costs that management could not fully explain immediately, indicating a need for further clarification.

Asked by Rajakumar Vaidyanathan

MSME Segmental NPA Stress Direct
There is no stress as such as a product, I will say. As MSME sector, there is no stress as such. There are individual accounts and because of their own individual peculiarity, some of the accounts are under stress. It's not high value. And that is the nature of business. It keeps happening. What I am trying to say is that it's nothing unusual. We do not see any stress in MSME portfolio as such.

Reassures that despite a 3% NPA in the MSME segment, management does not perceive systemic stress, attributing issues to individual, low-value accounts.

Asked by Niteen Dharmawat

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Detailed narrative

Record Profitability and Robust Growth

Indian Overseas Bank reported its highest-ever quarterly net profit of ₹1,051 crores in Q4 FY25, contributing to a full-year net profit of ₹3,335 crores, marking a 25.56% year-on-year increase. The bank achieved a business mix of ₹5,61,000 crores, growing 11.30% YoY. Gross advances expanded by 14.15% to ₹2,50,019 crores, while total deposits grew 9.11% to ₹3,11,939 crores, demonstrating strong business momentum.

Significant Asset Quality Improvement

Asset quality saw substantial improvement, with Net NPA reducing to 0.37% from 0.56% in the previous year, and Gross NPA falling to ₹5,348 crores from ₹6,794 crores. The Provision Coverage Ratio (PCR) increased to 97.30% from 96.85%. Despite a fresh slippage of ₹2,332 crores from a single MTNL account in Q4, the bank made 100% provision for it, and management expects a resolution within the next quarter.

Strong Capital Position and Strategic Capital Raise

The bank maintains a robust Capital Adequacy Ratio (CAR) of 19.74%, significantly above the mandatory 11.50% requirement, providing ample capital for over three years of credit growth. A QIP of ₹1,400 crores was executed in February, reducing government shareholding from 96% to 94%. This capital raise was primarily aimed at complying with SEBI's minimum public shareholding norms, rather than addressing a capital deficit for growth.

NIM Management and Treasury Outlook

Net Interest Income (NII) for Q4 FY25 grew by 13.03% to ₹3,123 crores. While a 25 bps reduction in lending rates due to RBI repo rate cuts is expected to impact NIM, the bank plans to mitigate this by focusing on MCLR/base rate linked loans (which constitute 50% of lending) and anticipating moderation in deposit rates as inflation is controlled. The bank aims to maintain its global NIM around 3.50% by year-end, with international book NIM expected to be 3.42-3.43% after an 8-10 bps impact.

Digital Transformation and Branch Expansion

Indian Overseas Bank is aggressively investing in technology, with an approved IT budget of over ₹1,700 crores for FY26, up from ₹1,200-1,400 crores annually. This investment covers new products, digital initiatives, IT infrastructure, and ATMs. The bank also plans to expand its physical footprint by opening over 100 new branches in FY26, building on the 101 branches opened in the previous year.

Resolution of Disputed Tax Liabilities

The bank has made significant progress in resolving its disputed tax liabilities. The total disputed amount has reduced from ₹9,700 crores to ₹5,933 crores, following successful appeals that resulted in ₹4,402 crores of 'giving effect orders'. Management expressed high confidence that the remaining amount will also be resolved, ensuring no crystallization of liability for the bank.

Cost Efficiency and RoA Improvement Targets

The Cost-to-Income Ratio for FY25 stood at 47.14%, improving to 44.35% in Q4 FY25. The bank targets further improvement, aiming for around 42% by the end of FY26. Return on Asset (RoA) crossed 1% for the first time, reaching 1.12%, and management aims to maintain and further improve this by a few basis points by the end of FY26, reflecting a focus on sustained profitability.

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