Indian Overseas Bank Q2FY26 – From PCA Prisoner to PSU Poster Boy: How Chennai’s Comeback Kid Found Its Mojo
1. At a Glance
If someone told you a few years ago that Indian Overseas Bank (IOB) — the same one once choking under NPAs and RBI’s PCA — would be clocking ₹1,226 crore quarterly profit with just 1.83% GNPA, you’d have sent them for a mental check-up. Yet here we are, watching a 1937-born Chennai veteran flex balance sheet muscles like a fintech influencer.
The market is still squinting in disbelief — ₹78,278 crore market cap, trading at ₹40.6, and a P/E of 18.3. For a PSU bank, that’s like showing up to an exam sober and topping it. With NIM now at 3.06% (up from 2.41% in FY22) and CRAR at a comfy 17.82%, IOB is no longer the “Government’s sympathy project” it used to be.
Net profit for FY25 stood at ₹4,262 crore, up 28% YoY. Branch count? 3,250. Customers? 41 million. NPAs? Shrunk faster than Maggi noodles in boiling water.
The irony? A bank that once couldn’t lend without tripping over its own NPAs now lectures fintechs on asset quality. Chennai boys have truly grown up.
2. Introduction
Let’s rewind to 2017. IOB was the kind of guest no one wanted at the RBI’s PCA party — broke, bloated, and burdened with NPAs north of 20%. It was on financial life support, surviving on government infusions like a PSU on steroids. Between FY18 and FY21, the Government of India pumped in ₹22,974 crore — basically, taxpayers were the venture capitalists.
Fast forward to 2025: the same IOB reports record profits, double-digit ROE, sub-1% Net NPA, and a near-perfect provision coverage ratio of 97%. If this were a Bollywood plot, it would be titled “From Bailout to Breakout.”
Behind this redemption arc lies quiet execution — controlling slippages, beefing up recovery, investing in digital channels, and aggressively pruning corporate loans in favour of retail, MSME, and agriculture. It’s now the PSU version of a startup pivot — except the founder wears a Nehru jacket instead of a hoodie.
From being a meme stock for retail investors (“IOB – Iss Overdraft Bank”) to now a turnaround poster child, this story deserves its own Netflix docuseries: “PCA Diaries: The Resurrection of Indian Overseas.”
3. Business Model – WTF Do They Even Do?
IOB is a full-service commercial bank offering retail, MSME, agri, and corporate banking — plus a bit of treasury and overseas business. Basically, they do everything except print their own currency (and after this turnaround, give them time).
Revenue Mix (Q1FY25):
Corporate / Wholesale Banking: 38%
Retail Banking: 36%
Treasury: 24%
Other: 2%
Loan Book (₹2.3 lakh crore):
Agriculture: 29%
Retail: 24%
MSME: 20%
Corporate/Others: 27%
The trick here is balance. Unlike private banks that chase high-margin retail and ignore the farmer’s loan, IOB is still the “inclusive banker” — financing both your wheat field and your wedding.
The bank also operates 4 overseas branches (Singapore, Hong Kong, Bangkok, Colombo), though let’s be honest — that’s more for nostalgic value than profits.
Their 18% stake in Universal Sompo General Insurance adds a little spice — the bancassurance tie-up helps cross-sell policies to retail customers.
And in FY24, IOB entered the “Loan Against Sovereign Gold Bonds” segment — because when life gives you gold, make collateral.
4. Financials Overview
Metric
Latest Qtr (Sep’25)
YoY Qtr (Sep’24)
Prev Qtr (Jun’25)
YoY %
QoQ %
Revenue
7,849
6,851
7,386
14.6%
6.3%
PAT
1,226
777
1,111
57.8%
10.3%
EPS (₹)
0.64
0.41
0.58
56%
10%
GNPA (%)
1.83
2.89
1.97
-36.7%
-7.1%
NNPA (%)
0.28
0.51
0.32
-45.1%
-12.5%
Commentary: IOB’s income is rising faster than most PSU banks’ excuses. Asset quality continues its dream run — GNPA and NNPA trending down every quarter. Profit up 58% YoY — the kind of headline that makes even SBI raise an eyebrow.
5. Valuation Discussion – Fair Value Range Only
Let’s crunch this like a CA with caffeine.
Method 1: P/E Based Industry P/E ~7.8× IOB EPS (TTM) = ₹2.22 → Fair Value Range: ₹17 – ₹20 (if valued like PSU peers) But since IOB’s growth and NPA profile are cleaner, assign premium P/E ~15× → ₹33
Method 2: P/B Based Book Value = ₹18.1 Average PSU bank P/B = 1.1× → Fair Range: ₹20 – ₹25 But with 11% ROE and rising NIM, justify 2× → ₹36
