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Indian Overseas Bank reported an all-time high net profit of ₹1,226 crore for Q2 FY26, up 57.79% YoY, driven by strong credit growth of 20.78% YoY and NIM expansion to 3.21%. Asset quality improved sharply with GNPA at 1.83% (down 89bps YoY) and slippage ratio of just 0.11%. Management maintained its 12% credit growth guidance as a floor, but indicated comfortable achievement of 17-18% for the full year. The bank plans to raise ₹4,000 crore via QIP in Q4 to reduce government stake. Key risks include potential ECL provisioning of ₹2,700-2,800 crore under draft RBI guidelines, though management expects to absorb this without P&L impact through buffer creation.
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Guidance to track
- Management stated 12% is the minimum; comfortable achieving 17-18% for FY26 based on strong pipeline.
- Board approval obtained; capital raising to reduce government stake and support growth.
- Given strong profitability, bank expects to shift to new tax regime this fiscal year.
- Management plans to create additional provisions over next 18 months to absorb estimated ₹2,700-2,800 crore ECL requirement.
Risks flagged
- Estimated additional provision requirement of ₹2,700-2,800 crore, though management expects to absorb via buffer without P&L hit.
- Analyst raised concern; management stated no visible stress yet and borrowers have adapted.
- CAR fell from 18.06% in Q1 to 17.94% in Q2, though management attributes it to profit not yet added to capital.
Key quotes
- The bank has reached a new milestone of recording an all-time high of net profit rupees 1,226 crores for the quarter with 57.79% year-on-year increase.
- I can very safely say that against guidance of 12% we will be very comfortable in 17 or 18% of growth that we can foresee.
- We do not intend to allow any account to go to SMA 2 level. So that way we are focusing on it and most of the accounts are getting regularized at SMA0 or SMA1 level.
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