Indian Overseas Bank has delivered exceptional financial performance in the third quarter, with net profit surging 56% year-on-year and net interest income showing robust growth. The state-owned bank demonstrated strong earnings capacity backed by 24% expansion in advances and enhanced operational efficiency, while also achieving significant improvements in asset quality metrics.

Comprehensive Financial Performance

The bank's third quarter results showcase substantial improvement across multiple financial indicators, reflecting strengthened fundamentals and effective operational management.

Strong Earnings and Revenue Growth

The bank achieved a net profit of ₹1,365.00 crores in the third quarter, compared to ₹874.00 crores in the corresponding quarter of the previous year, representing a substantial year-on-year growth of 56%. This significant increase demonstrates the bank's enhanced profitability and improved operational performance.

Net interest income rose impressively to ₹3,299.00 crores, marking a healthy growth of 18%. The bank's operating profit stood 15% higher at ₹2,603.00 crores against ₹2,266.00 crores, while other income increased by 16% to ₹1,499.00 crores. The bank's net interest margin for the quarter improved to 3.42% from 3.35% in the preceding quarter, with the third quarter NIM standing at 3.47%.

Loan Portfolio and Business Growth

The bank's advances portfolio demonstrated strong expansion, growing 24% year-on-year to ₹2.95 lakh crore. This substantial growth in lending activities reflects the bank's enhanced market presence and effective credit deployment strategies.

Asset Quality Improvement

The bank demonstrated significant improvement in asset quality metrics during the quarter. Gross non-performing assets eased to 1.55% from 1.83% on a quarter-on-quarter basis and 2.55% year-on-year, reflecting better credit management and recovery efforts.

Provision Strategy and Future Preparedness

The bank created an additional provision buffer of ₹1,500.00 crore in the quarter under review in anticipation of the expected credit loss norms, which will become effective from April 2027. This provision represents 60% of the total requirement for ECL provisions for the bank, which is estimated at ₹2,500.00 crore, demonstrating proactive risk management and regulatory compliance preparation.

Market Response and Banking Sector Performance

As a state-owned bank operating in India's competitive banking landscape, these results demonstrate the bank's solid positioning in the financial services sector. The substantial growth in profitability, coupled with improved asset quality metrics and strong loan growth, showcases the bank's capacity to navigate market conditions while maintaining strong financial performance and operational efficiency.

Indian Overseas Bank has announced a reduction in its overnight marginal cost of funds-based lending rate (MCLR) by 5 basis points, marking the latest adjustment in the state-owned lender's pricing strategy. The decision comes amid an ongoing government stake sale and reflects the bank's continued focus on competitive lending rates.

MCLR Reduction Details

The bank's Asset Liability Management Committee approved the rate reduction during a meeting held on January 13, following a comprehensive review of MCLR workings as of January 10. The decision was communicated through a regulatory filing to stock exchanges.

The bank had last revised its MCLR in December, and the revised rates will remain in force until further review.

Impact on Borrowers

The rate revision is expected to have limited impact on existing borrowers, as most loans are linked to longer-term MCLR tenors that remain unchanged. However, new borrowers stand to benefit from the adjustment.

New Borrower Rate Range:

• Interest rates: 8.30% to 8.85%
• Variation based on loan tenure selected
• Applicable for fresh loan applications

One basis point equals 0.01%, making this a modest but meaningful adjustment for new lending activities.

Government Stake Sale

In a separate development, the government has launched an Offer For Sale (OFS) to reduce its holding in the lender. The divestment plan includes specific parameters for equity reduction.

This stake sale represents part of the government's broader divestment strategy for public sector banks.

Market Performance

Indian Overseas Bank shares closed at ₹35.48 on Tuesday, registering a gain of 0.54% from the day's opening price on the NSE. The MCLR adjustment announcement was made after market hours through the regulatory filing, positioning the stock for potential investor attention in subsequent trading sessions.