Indian Overseas Bank Q4FY25 profit surges 30% to Rs 1,051cr, FY25 net climbs 25.5%

Indian Overseas Bank concluded FY25 on a historic note, reporting its highest-ever quarterly net profit of ₹1,051 crore in the fourth quarter, a 30.07 percent increase over the same period last year. This performance represents a significant milestone, as it marks the first time the bank has crossed the ₹1,000 crore mark in a single quarter. For the full financial year, net profit reached ₹3,335 crore, a year-on-year rise of 25.56 percent. This strong showing reflects Indian Overseas Bank’s ongoing operational turnaround and places it firmly among the leading performers in the public sector banking space.

This impressive result comes against the backdrop of a broader structural revival within India’s public sector banks, which are benefiting from improved asset quality, higher net interest margins, and greater traction in rural and semi-urban lending. The financial year ended March 2025 saw public sector lenders outperform private peers in terms of provisioning buffers and profitability expansion. IOB, in particular, has steadily improved since exiting the Reserve Bank of India’s PCA framework in 2018, with its FY25 results underscoring the sustainability of its recovery.

Why Did Indian Overseas Bank’s Profit Jump in Q4 FY25?

The bank’s operating profit surged to ₹2,618 crore in the March quarter, reflecting a 33.5 percent increase compared to the same quarter last year. This was primarily supported by a 13.03 percent rise in Net Interest Income, which grew to ₹3,123 crore in Q4FY25 from ₹2,763 crore in Q4FY24. Sequentially, the NII increased by nearly 12 percent. This growth was complemented by operational efficiency gains, with the Cost-to-Income ratio falling significantly to 44.35 percent from 62.58 percent a year earlier. The improved income-cost dynamics were aided by digital adoption and tighter expense management.

Profitability ratios also improved substantially. The Return on Assets rose to 1.12 percent in Q4FY25 from 0.94 percent a year earlier, indicating stronger utilisation of the bank’s asset base. Similarly, Return on Equity increased to 19.53 percent, up from 18.5 percent. Margins followed suit, with the domestic Net Interest Margin rising to 3.77 percent from 3.73 percent, and the global NIM improving to 3.58 percent from 3.53 percent.

What Were Indian Overseas Bank’s Full-Year FY25 Highlights?

Over the entire fiscal year, IOB delivered a net profit of ₹3,335 crore, up from ₹2,656 crore in FY24. Operating profit increased to ₹8,688 crore, representing a 28.44 percent year-on-year expansion. The Net Interest Income for the year stood at ₹10,890 crore, reflecting a 10.79 percent increase from the previous year. These gains underscore the effectiveness of the bank’s lending strategy and treasury management across both domestic and international portfolios.

The Return on Assets for the full year improved to 0.92 percent, compared to 0.81 percent in FY24. Return on Equity remained strong at 16.28 percent. The Cost-to-Income ratio for FY25 declined to 47.14 percent, further illustrating the impact of process automation and leaner operations on the bank’s core earnings.

How Fast Is IOB Growing Its Business Book?

The bank’s total business as of March 31, 2025 stood at ₹5,61,958 crore, registering an 11.3 percent year-on-year increase. This included ₹3,11,938 crore in total deposits and ₹2,50,019 crore in gross advances. Advances grew by 14.15 percent year-on-year and 5.21 percent sequentially, driven by credit demand in the retail, MSME, and agri-loan segments.

IOB’s Current Account and Savings Account (CASA) deposits rose to ₹1,36,161 crore, an 8.49 percent increase from ₹1,25,508 crore a year earlier. The CASA ratio was healthy at 43.65 percent, reflecting continued traction in low-cost deposits and increased penetration in semi-urban regions. The Credit-to-Deposit ratio stood at 80.15 percent, indicating efficient capital deployment.

How Has Asset Quality Improved in FY25?

IOB’s asset quality demonstrated significant improvement during FY25. Gross Non-Performing Assets declined to 2.14 percent as of March 31, 2025, down from 3.10 percent a year ago, and 2.55 percent in the previous quarter. Net NPAs fell to 0.37 percent, improving from 0.57 percent in Q4FY24. The Provision Coverage Ratio increased to 97.30 percent, among the highest in the industry, up from 96.85 percent a year ago.

These improvements reflect better underwriting standards, proactive NPA resolution mechanisms, and enhanced recovery efficiencies. The continued reduction in stressed assets indicates a maturing credit assessment framework and lower incremental slippage risk for FY26.

What Recovery Trends Shaped FY25?

The bank’s recovery performance during FY25 was robust, with total recoveries for the year amounting to ₹4,014 crore. During Q4 alone, IOB recovered ₹992 crore, including ₹530 crore from technically written-off accounts. For the full year, recoveries from written-off loans totalled ₹2,689 crore. These inflows supported earnings and helped reduce provisioning pressure, thereby adding to bottom-line profitability.

Is Indian Overseas Bank Adequately Capitalised?

The bank’s capital adequacy ratio under Basel III norms stood at 19.74 percent as of March 2025, comfortably above regulatory requirements. This included Common Equity Tier 1 capital of 17.13 percent and Tier II capital of 2.61 percent. The robust capital position allows the bank to pursue growth without immediate dilution or dependence on capital infusion from the government.

The healthy capital buffer also positions IOB favourably among its peers in the mid-sized PSU bank category. It provides adequate room to scale lending operations, support digital investments, and maintain high provisioning standards.

What ESG and Innovation Initiatives Were Undertaken?

In FY25, IOB undertook several strategic initiatives focused on environmental, social, and governance goals. The bank launched its ESG mascot, “Mr. Harit,” to drive stakeholder awareness around sustainability. It also joined the Partnership for Carbon Accounting Financials (PCAF), a global alliance aimed at standardising emissions disclosures in financial institutions.

In a step toward greener lending, the bank signed a memorandum of understanding with the Indian Green Building Council, enabling access to verified energy-efficient and certified building projects. On the technology front, IOB collaborated with B.S. Abdur Rahman Crescent Institute and Ernst & Young to host a nationwide cybersecurity hackathon, reinforcing its commitment to digital banking security and innovation.

How Is the Branch Network Expanding?

As of March 31, 2025, IOB operated 16,967 customer touchpoints across India. This included 3,335 full-service branches, 3,497 ATMs, and 10,135 business correspondent (BC) outlets. Nearly 58 percent of the bank’s branches are located in rural and semi-urban areas. During FY25, the bank opened 101 new branches to enhance its presence in underbanked districts and support rural credit expansion.

This geographic spread aligns with the government’s financial inclusion agenda and strengthens IOB’s market position in priority sector lending.

How Are Investors and Analysts Reacting?

Indian Overseas Bank’s results have drawn a positive response from the market. Following the earnings release, the stock saw increased buying interest, with trading volumes rising and the share price approaching its 52-week high. The results have also prompted a shift in institutional sentiment, especially among domestic institutional investors. April 2025 data indicates that public sector mutual funds and insurance companies have increased their exposure to the bank.

Foreign Institutional Investors remain cautious but have started to selectively increase holdings following the strong Q4 results. While FII shareholding remains modest relative to private sector peers, IOB’s improved asset quality and strong capital buffer may lead to incremental FII flows in the coming quarters.

Brokerages have adjusted their outlook from “Hold” to “Accumulate,” citing improving profitability metrics, stable asset quality, and sectoral tailwinds. Technical indicators also point toward sustained bullishness, with the stock trading above key moving averages and showing no signs of being overbought.

Should Investors Buy, Hold, or Sell IOB Shares?

Investor outlook for IOB stock remains constructive. The improving return ratios, healthy provisioning, and digital momentum have positioned it as a compelling pick within the PSU banking universe. For new investors, the stock presents an opportunity to capitalise on continued operational stability and potential valuation re-rating. For existing shareholders, holding the stock appears justified, with medium-term catalysts likely to be driven by digital expansion and loan growth. Selling is not currently recommended unless broader macroeconomic factors or sector-specific headwinds emerge.

Retail investor sentiment has also been buoyed by IOB’s visible participation in sustainability campaigns, technology innovation, and regional outreach programs, all of which contribute to an improved brand perception and potential investor stickiness.

What’s Next for Indian Overseas Bank in FY26?

With the foundation laid in FY25, Indian Overseas Bank is expected to accelerate its digital initiatives, deepen ESG-linked credit offerings, and strengthen its presence in semi-urban lending. Analysts anticipate stronger cross-sell performance, more robust MSME credit flow, and sustained profitability momentum.

As public sector banks regain investor trust and market valuations inch higher, IOB’s FY25 performance could serve as a blueprint for how mid-sized government-owned banks can transition into digitally enabled, profit-generating financial institutions with ESG credibility and scalable capital structures.