Indian Overseas Bank

Rating action

• CARE upgraded Basel III Tier II Bonds to AA+/Stable; CDs reaffirmed at A1+ (30-Jul-2026).

Instruments rated

• INE565A08043: Basel III Tier II Bonds rated CARE AA+; Stable.
• INE565A08050: Basel III Tier II Bonds rated CARE AA+; Stable.
• INE565A08068: Basel III Tier II Bonds rated CARE AA+; Stable.
• Certificate of Deposits rated CARE A1+; Reaffirmed.

Rationale

• Improved financial risk profile with better asset quality and profitability.
• GoI ownership and ongoing support underpin ratings.
• Strong CASA, RAM-led advances, and comfortable capital adequacy.
• Asset-quality improvement with recoveries reducing credit costs; NIM moderated by rate cuts.
• Q1FY27 PAT ₹1,659 crore and total income ₹10,938 crore.

Risks & sensitivities

• Government support diluted below 51% could trigger downgrade.
• Deterioration in NNPA above 2.5% sustained; capital cushion risk.
• PONV trigger for Tier II bonds may affect viability assessment.

Outlook

• Outlook: Stable.

Material changes since last rating

• Tier II Bonds upgraded from CARE AA to AA+; CDs reaffirmed.

Business Overview

• Public sector bank offering retail, MSME, agriculture, and corporate lending with RAM focus.
• RAM share of total advances rose to 81.21% in Jun-26.
• Digital initiatives include IOB Digital Hub, IOB Buddy, and digital onboarding.
• Asset quality improving with GNPA 1.33% and NNPA 0.18%.

Operational Highlights

• NPA metrics improved; GNPA 1.33%, NNPA 0.18% in Jun-26.
• Total income grew 23.37% YoY to Rs 10,938 Cr.
• Net profit rose 49.32% YoY to Rs 1,659 Cr.
• NIM Domestic 3.48%, Global 3.37%; ROA 1.41%, ROE 22.69%.
• Total deposits Rs 376,193 Cr; Advances Rs 322,132 Cr.
• CRAR 19.36%; CET1 36,081 Cr; Tier 2 5,283 Cr.

Financial Performance

• Net Interest Income Rs 3,688 Cr; Non-Interest Income Rs 2,160 Cr.
• Total Income Rs 10,938 Cr; Operating Profit Rs 2,693 Cr.
• Net Profit Rs 1,659 Cr; ROE 22.69%, ROA 1.41%.
• NPA metrics: GNPA 1.33%, NNPA 0.18%, PCR 97.67%.
• Fresh slippages 195 Cr in Jun-26; Slippage ratio improved.
• EPS Basic & Diluted Rs 0.86.

Capital Structure & Liquidity

• CRAR 19.36%; CET1 36,081 Cr; Tier 2 5,283 Cr.
• Total capital Rs 41,364 Cr; RWA Rs 213,713 Cr.
• Deposits Rs 376,193 Cr; Advances Rs 322,132 Cr.
• Borrowings Rs 4,724 Cr; Book value per share Rs 15.79.
• P/BV 2.16x; CASA 41.45% domestic; CD ratio 83.32% domestic.

Strategic Priorities & Outlook

• Digital transformation driving onboarding and customer experience.
• RAM-focused lending mix optimization to sustain strong growth.
• Strategic emphasis on digital platforms and ROE improvement.

Risks & Mitigation

• Asset quality risks persist; NPAs improved but slippages remain.
• Macro headwinds and credit costs pose threats.
• Mitigation: robust provisioning, recoveries, prudent credit policy.

Governance & Leadership

• No governance changes disclosed in this filing.

Financial highlights

• Net profit rose 49.32% to ₹1,659 crore in Q1 FY27.
• Operating profit up 14.21% to ₹2,693 crore.
• NII up 34.30% to ₹3,688 crore.
• Domestic NIM 3.48%, Global NIM 3.37%.
• ROA 1.41%, ROE 22.69%.
• PCR 97.67%.

Business growth & deposits

• Total business grew 17.72% to ₹6,98,325 crore.
• Total deposits up 13.72% to ₹3,76,193 crore.
• Domestic CASA 41.45%, Global CASA 41.05%.
• SB deposits up 18.14% to ₹1,27,262 crore.
• Retail term deposits up 15.81% to ₹1,86,882 crore.

Credit growth & RAM segment

• Total credit up 22.75% to ₹3,22,132 crore.
• RAM segment grew 35.82% YoY.
• Within RAM: Retail 36.49%, Agri 46.84%, MSME 16.15%.

Asset quality & slippages

• Gross NPA 1.33%, Net NPA 0.18%, PCR 97.67%.
• Slippages ₹195 crore; slippage ratio 0.06%.
• NPA recovery ₹654 crore (3.35x slippages).

Capital adequacy

• CRAR 19.36%, Tier I 16.88%.

Branch expansion

• Domestic network expanded to 3,522 branches with 28 new branches this quarter.

Security cover status

• NIL security cover as on 30 June 2026.
• No secured listed NCDs outstanding; all NCDs are unsecured.
• Total secured listed NCDs outstanding: zero.
• Security ratio not applicable due to NIL cover.

Security structure and asset position

• Nature of security: none; no exclusive or pari-passu charges.
• Main asset types: none; no assets pledged against debt.
• Liabilities secured by assets: none; no secured debt.

Deviation status and fund-raising mode

• Mode of fund raising: equity shares and non-convertible debt securities issued.
• No deviation or variation in the utilisation of proceeds.

Financial results approved

• Board approved unaudited (reviewed) Standalone and Consolidated results for quarter ended 30.06.2026.
• Results reviewed by the Board due to pending independent directors; includes segment results and assets/liabilities.
• Independent Audit Report attached to the results.

Loss appropriation and AGM action

• Loss appropriation of ₹18,73,334.22 Lakhs using Share Premium approved.
• Executed on 10 July 2026 after RBI clearance and AGM approvals.

Accounting policy and regulatory disclosures

• Premises depreciation life revised to 50 years; depreciation on a proportionate basis.
• Investment Fluctuation Reserve discontinued; moved below the line to Revenue Reserve.
• Consolidated Pillar 3 disclosures (Leverage, LCR, NSFR) disclosed on bank website.

Investments and consolidation

• Associates Odisha Grameen Bank and ACER Credit Rating Pvt Ltd accounted under equity method.
• Bank holds 18.06% in Universal Sompo General Insurance; not treated as JV.

Provisioning and risk metrics

• Provision for unhedged foreign currency exposure under RBI guidelines.
• Provisioning ratio: 97.67% as of 30.06.2026.
• Covid-19/natural calamity contingencies provisioned: ₹86,273.40 Lakhs.
• Forward-looking ECL provision: ₹2,15,000 Lakhs.
• Co-lending Arrangements: two CLA partners; ₹4,263 Lakhs disbursed; ROI 8.50% p.a.

Audits and security cover

• Security cover certificate: NIL for unsecured listed debt securities as of 30.06.2026.
• Independent auditors’ limited review: no material misstatement; some Pillar 3 data not reviewed.
• Certain foreign-branch data reviewed by other auditors; consolidated impact not material.

Meeting Details

• Earnings call for quarter ended June 30, 2026, on July 20, 2026 at 17:30 IST.
• Mode: Group Call / Virtual.
• Organizer: Indian Overseas Bank.
• Registration details furnished in the attached invite.

Participants

• Management participants: MD & CEO; two Executive Directors.

Purpose

• Discuss unaudited (reviewed) quarterly results for June 30, 2026.

Availability

• Presentation copy for the meet will be furnished in due course.