01 — At a Glance
The Sleeping Giant Woke Up. Everyone Ignored It Anyway.
- 52-Week High / Low₹45.2 / ₹33.0
- Q3 FY26 Revenue (Standalone)₹8,172 Cr
- Q3 FY26 PAT (Standalone)₹1,365 Cr
- Q3 FY26 EPS (₹)₹0.71
- Annualised EPS (Q3×4)₹2.84
- Book Value₹13.90
- Price to Book2.45x
- GNPA %1.54%
- NNPA %0.24%
- Debt / Equity10.9x
The CFO’s Own Words (14 Jan 2026): “All-time high quarterly net profit of Rs.1,365 crores.” YoY profit jump: 56.18%. Gross advances growing 24%+. Deposits up 14%+. GNPA down 101 basis points YoY. Quarterly slippages at an unheard-of 0.11%. And yet… the stock returned -12.4% in the last 6 months. The valuation arbitrage is so thick, you could cut it with a khukri.
02 — Introduction
Meet the Bank That’s Healing Itself While Everyone Sleeps
Indian Overseas Bank is a 1937-vintage public sector bank that spent a decade getting absolutely wrecked. We’re talking losses in FY16 (₹-2,897 Cr), negative book value, and nine years under RBI’s Prompt Corrective Action (PCA) cage. Between FY15 and FY21, it was an accounting hospital visit on loop.
Then, the Government of India decided it had skin in the game. It pumped ₹27,634 crore in equity since FY15 — roughly the GDP of Montenegro. Now, GoI owns 92.44% (down from 95.84% in FY22). And here’s the kicker: the bank isn’t pretending to heal anymore. It’s actually healing. Record PAT. GNPA collapsed. ROE at 20.98% (up 312 bps YoY). Advances growing faster than deposits. This is not a turnaround story dressed up for investor day. This is a turnaround that’s actually turning.
But the stock has delivered -23.7% returns in the last year. Why? Because the market priced in either (a) the bank would fail, or (b) the bank would muddle along like other PSU banks. Neither happened. The market got confused. Valuations stayed locked in the basement.
Welcome to your contrarian PSU bank deep-dive. With all the sarcasm, data, and uncomfortable truths that label demands.
The Big Fact Nobody Mentions: In Q3 FY26, IOB’s net profit grew 56% YoY. SBI’s net profit grew 13%. The smaller bank is running circles around the giant. Market still values SBI at 13.02x P/E and IOB at 13.8x. If you think the gap should exist, you’re not thinking hard enough.
03 — Business Model: What Does a PSU Bank Even Do?
Collect Deposits. Lend Money. Pray The Borrowers Repay. Repeat.
IOB operates 3,438 branches across India (plus four overseas) and doesn’t have a “secret sauce” business model. It takes deposits, lends to retail/agriculture/MSME/corporate, earns net interest margin, pays for deposits and operations, and whatever’s left is profit. Very simple. Very boring. Exactly like all other banks.
What’s different is the portfolio mix. In Q3 FY26, Retail + Agriculture + MSME (RAM) now forms 77.11% of gross advances (up from 66.53% in FY24). Corporate & overseas dropped to 22.89% from 33.47%. This is deliberate. Lower volatility. Higher capital efficiency. RAM doesn’t blow up the same way corporate exposures do.
Geographically, it’s heavily South-Indian. Tamil Nadu alone is 38% of advances and 35% of deposits. The other four Southern states add another 32% combined. This is not accidental — IOB was literally founded by Tamil businessmen in 1937. Regional moat is real, even if unspoken. It means distribution depth in a specific geography translates to better collection cycles and customer stickiness.
CASA ratio stands at 40.85% domestically. That’s the ratio of Current & Savings Accounts (zero-interest deposits, sticky, long-term) to total deposits. Higher CASA = lower funding cost. Industry average hovers around 40-42%. IOB is inline, which is good enough for a bank that spent a decade bleeding.
Retail28.42%Of Advances
Agriculture31.53%Of Advances
MSME17.17%Of Advances
Corporate22.89%Of Advances
Core Strength: Quarterly slippages contained at ₹250-300 Cr on a ₹3 lakh Cr book. CEO explicitly stated “no corporate slippage over the last 2.5-3 years.” That’s intentional selectivity, not luck. Gold loans yield 8.5%-9%, with ~50-60% of gold loan book servicing agriculture. So it’s using gold as a lever to deepen agricultural reach.
💬 If a PSU bank can grow advances 24%+ YoY while slashing GNPA, why do private banks still get all the investor love? Drop your thoughts.
04 — Financials Overview
Q3 FY26: The Numbers That Broke The “PSU Banks Are Dead” Narrative
Result type: Quarterly Results (Standalone) | Q3 FY26 EPS: ₹0.71 | Annualised EPS (Q3×4): ₹2.84 | P/E Recalculated (CMP ₹34.1 ÷ Ann. EPS ₹2.84): 12.01x
| Metric (₹ Cr) |
Q3 FY26
Dec 2025 |
Q3 FY25
Dec 2024 |
Q2 FY26
Sep 2025 |
YoY % |
QoQ % |
| Revenue | 8,172 | 7,112 | 7,849 | +14.9% | +4.1% |
| Operating Profit | 2,603 | 1,639 | 2,015 | +58.8% | +29.1% |
| Op. Margin % | 31.8% | 23.0% | 25.6% | +880 bps | +620 bps |
| PAT | 1,365 | 874 | 1,226 | +56.2% | +11.3% |
| EPS (₹) | 0.71 | 0.46 | 0.64 | +54.3% | +10.9% |
The Operative Margin Jump Is Insane: 880 basis points YoY. The bank went from 23% to 31.8% operating margin. This isn’t accounting magic — it’s the result of controlled slippages + recoveries in full swing + lower credit costs. NIM (Net Interest Margin) improved to 3.32% from 3.21% last quarter. CEO guided to sustaining 3.3-3.4% NIM range. For a PSU bank, that’s fortress-level stability. Annualised EPS of ₹2.84 on CMP of ₹34.1 = 12.01x P/E. Lower than even the stated 13.8x because we annualised quarterly EPS (which is allowed for Q1-Q3 results; Q4 isn’t annualised). This is genuinely cheap for a bank growing at 56% YoY.
05 — Valuation: Fair Value Range
Three Methods. One Screaming Verdict: You’re Not Paying Enough.
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