💰 Financial Performance

Revenue Growth by Segment

Total operating income grew 13.36% YoY from INR 29,706 Cr in FY24 to INR 33,676 Cr in FY25. In Q1FY26, total income reached INR 8,866 Cr, a 17.15% increase from INR 7,568 Cr in Q1FY25. Advances grew 14.15% YoY to INR 2,50,019 Cr in FY25, with the RAM (Retail, Agri, MSME) segment growing to constitute 73.39% of the book by June 2025.

Geographic Revenue Split

The bank exhibits high regional concentration with the top five states contributing approximately 70% of advances and 64% of total deposits. Tamil Nadu is the primary driver, accounting for 38% of advances and 35% of total deposits as of June 30, 2025.

Profitability Margins

Return on Total Assets (ROTA) improved from 0.80% in FY24 to 0.90% in FY25, further rising to 1.14% in Q1FY26. Net Profit After Tax (PAT) increased 25.56% from INR 2,656 Cr in FY24 to INR 3,335 Cr in FY25. H1FY26 PAT stood at INR 2,337 Cr, a 65.74% increase over H1FY25 (INR 1,410 Cr).

EBITDA Margin

Operational expenses as a percentage of total assets decreased from 2.64% in FY24 to 2.08% in FY25, reflecting improved efficiency. However, credit costs increased to 1.12% in FY25 from 1.02% in FY24 due to higher slippages, impacting core profitability.

Capital Expenditure

The bank raised INR 1,436 Cr via Qualified Institutional Placement (QIP) in Q4 FY25 to strengthen its capital base. Government of India previously infused INR 24,074 Cr between FY18 and FY22 through recapitalization bonds to support solvency.

Credit Rating & Borrowing

The bank maintains a strong liquidity profile with a Liquidity Coverage Ratio (LCR) of 123.54% and a Net Stable Funding Ratio (NSFR) of 128.49% as of June 2025. The bank reduced its Marginal Cost of Funds Based Lending Rate (MCLR) by 5 basis points effective December 15, 2025.

⚙️ Operational Drivers

Raw Materials

For IOB, the primary 'raw material' is its deposit base, with CASA (Current Account Savings Account) deposits representing 43.78% of total deposits as of June 30, 2025. Interest-bearing funds are the core cost driver.

Import Sources

Not applicable as a financial institution; however, the bank sources 35% of its deposits and 38% of its advances from the state of Tamil Nadu, indicating high domestic regional sourcing of capital.

Key Suppliers

Not applicable; however, the bank relies on the Government of India (94.61% owner) for capital support and the RBI for liquidity facilities like the Marginal Standing Facility (MSF) and Repo operations.

Capacity Expansion

As of March 31, 2025, IOB operated 3,335 domestic branches, 3,497 ATMs, and 10,135 business correspondence (BC) relationships. It also maintains 4 overseas branches in Singapore, Hong Kong, Colombo, and Bangkok.

Raw Material Costs

Cost of interest-bearing funds is competitive due to a robust CASA base of 43.78%. The bank's credit cost stood at 1.12% in FY25, reflecting the cost of asset quality maintenance.

Manufacturing Efficiency

The Credit-to-Deposit (CD) ratio improved to 78.72% as of March 31, 2025, from 74.61% in FY24, indicating better utilization of the deposit base for lending activities.

Logistics & Distribution

Distribution is handled through 3,335 branches and 10,135 BC relationships. The bank aims to expand banking outlets to cover more districts to increase market reach.

📈 Strategic Growth

Expected Growth Rate

19.43%

Growth Strategy

The bank targets growth by increasing interest income from the RAM (Retail, Agriculture, MSME) business, which already constitutes 73.39% of advances. It is also pursuing strategic relationships with corporate and government entities for employee-based products and increasing fee-based income through bancassurance.

Products & Services

Retail loans, agricultural credit, MSME financing, corporate loans, savings accounts, current accounts, and non-life insurance products through its JV.

Brand Portfolio

Indian Overseas Bank (IOB), Sakthi IOB Chidambaram Chettiar Memorial Trust, Sneha (Financial Literacy Centres).

New Products/Services

The bank is focusing on digital banking products and credit schemes specifically for women to drive financial inclusion and new customer acquisition.

Market Expansion

IOB plans to open new banking outlets to cover more districts and leverage its 4 overseas branches to capture international business.

Market Share & Ranking

As of June 30, 2025, IOB's share in sector-wide deposits was 1.45% (down from 1.65% in 2021), while its share in total advances improved to 1.41% (up from 1.24% in 2021).

Strategic Alliances

Joint ventures include Universal Sompo General Insurance (18.06% stake) and Indian International Bank Malaysia (35% stake). It also sponsors the Odisha Gramya Bank (35% stake).

🌍 External Factors

Industry Trends

The industry is shifting toward an Expected Credit Loss (ECL) framework for provisioning. There is also a significant trend toward digital banking to reduce operating costs and improve customer interface.

Competitive Landscape

IOB competes with 11 other Public Sector Banks (PSBs) and private banks. It maintains a competitive cost of funds relative to the PSB average due to its retail franchise.

Competitive Moat

IOB's moat is its 94.61% sovereign ownership, which ensures high depositor confidence and capital support. Its strong CASA base (43.78%) provides a sustainable low-cost funding advantage over many private peers.

Macro Economic Sensitivity

The bank is sensitive to interest rate cycles; repo rate cuts impact NIM. It is also exposed to geopolitical issues and tariffs which could affect its corporate and overseas loan portfolios.

Consumer Behavior

Customer preferences are shifting toward digital banking, prompting IOB to enhance its digital interface to prevent customer churn and reduce physical overhead.

Geopolitical Risks

Ongoing geopolitical tensions and the impact of international tariffs are cited as potential risks that could adversely impact asset quality metrics.

⚖️ Regulatory & Governance

Industry Regulations

The bank must comply with RBI's SLR (currently holding 7.22% excess), LCR, and NSFR requirements. It is also preparing for the transition to the Expected Credit Loss (ECL) provisioning framework.

Environmental Compliance

Direct environmental risk is low, but indirect credit risk exists if the bank's asset portfolio (borrowers) is impacted by climate factors. The bank uses short-to-medium term lending to mitigate this.

Taxation Policy Impact

Not specifically disclosed; however, the bank reported a PAT of INR 3,335 Cr in FY25 after all applicable taxes and provisions.

Legal Contingencies

The bank is currently in non-compliance with SEBI LODR regulations as its 10-member Board does not include a female director. No specific INR values for pending court cases were disclosed.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the ability to limit slippages from the 'vulnerable book' (SMA-1, SMA-2, and restructured accounts) amidst concerns of retail over-leveraging.

Geographic Concentration Risk

High concentration in Tamil Nadu, which accounts for 38% of advances and 35% of deposits, creating a single-state economic dependency.

Third Party Dependencies

Significant dependency on the Government of India for capital (94.61% stake) and on Business Correspondents (10,135) for rural distribution.

Technology Obsolescence Risk

The bank faces the risk of falling behind digital-native competitors, necessitating continuous investment in technology infrastructure and cybersecurity.

Credit & Counterparty Risk

Gross NPA stood at 1.83% and Net NPA at 0.28% as of September 2025. The top 20 borrowers represent 104.23% of net worth, indicating high counterparty concentration risk.