IOB posts 27% rise in Q1 profit, asset quality continues to improve

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Indian Overseas Bank (IOB) has sustained its growth momentum in the first quarter of this fiscal year, achieving double-digit growth in net profit and improving its asset quality with the lowest quarterly slippages in recent quarters.
The Chennai-headquartered public sector bank also announced that its plan to raise up to ₹5,000 crore capital through QIP, FPO, or other modes this fiscal year is on track, with approvals currently being obtained.
For the quarter ending June 30, 2024, IOB reported a 27 per cent increase in net profit to ₹633 crore (₹500 crore).
Ajay Kumar Srivastava, MD & CEO, attributed the strong rise in net profit to the growth in interest income and non-interest income.
Interest income increased by 20 per cent to ₹6,536 crore (₹5,424 crore), and non-interest income rose 29 per cent to ₹1.033 crore (₹803 crore). Net interest income grew by 5 per cent to ₹2.441 crore , with a net interest margin (NIM) of 3.06 per cent.

“Getting deposits has become a big challenge for the entire banking industry. Every bank is grappling with that challenge. So we are aiming to maintain NIM around the level 3.06 to 3.10,” he said.

Asset quality improves

While NPA provisions were lower at ₹164 crore (₹809 crore in Q1FY24), total provisions were higher at ₹938 crore (₹838 crore). Profits would have been higher but for a ₹734 crore of ‘standard provision’, which the bank made for strengthening the balance sheet.

In the June 2024 quarter, the gross NPA ratio declined to 2.89 per cent (₹6,649 crore) from 7.13 per cent (₹13,629 crore) in the June 2023 quarter and 3.10 per cent (₹6,794 crore) in the March 2024 quarter. The net NPA ratio remained below 1 per cent at 0.51 per cent, down from 1.44 per cent in the year-ago quarter and 0.57 per cent in Q4FY24.

RAM segment

Gross advances increased by 20 per cent to ₹230,092 crore as of June 30, 2024, from ₹191,263 crore a year ago. Of the total domestic advances of ₹212,459 crore, the RAM (retail, agriculture, and MSME) segment accounted for 72 per cent.

“IOB aims to bring the share of the RAM segment to 65 per cent by the end of this fiscal,” he said.

Total deposits grew by 13 per cent to ₹298,681 crore (from ₹ 264,401 crore). The CASA ratio dropped to 42.17 per cent (44.14 per cent a year ago). Srivastava mentioned that the bank’s fresh slippages at ₹277 crore were one of the lowest quarterly numbers in recent quarters. Total recovery stood at ₹582 crore (₹884 crore).