Indian Overseas Bank targets 3.25-3.30% net interest margin in FY25

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Despite challenges from rising budget costs, Indian Overseas Bank (IOB) intends to maintain its margins around 3.25% to 3.30% going forward. The bank also plans to reduce gross non-performing assets (NPA) by 100 basis points (bps) to 2.10% by FY25, with net NPA targeted at 0.25-0.30%.

In an interview with CNBC-TV18, Ajay Kumar Srivastava, Chief Managing Director & CEO of Indian Overseas Bank, highlighted the bank’s strategy to maintain margins and reduce NPA while growing loans at a mid-teen rate.

In further discussion regarding net interest margins (NIMs), Srivastava mentioned that the bank raised interest income while simultaneously decreasing expenses on interest paid by managing its CASA (low-cost deposit accounts). They opted against acquiring high-cost bulk deposits, and a combination of these strategies led to an enhancement in NIM to 3.28%.

“There will be a challenge on the margin because the deposit is getting costlier day by day. But we have our plans concretised and we are implementing it successfully and we hope that by the same strategy will be able to maintain it,” Srivastava added.

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When discussing loan growth, the CEO stated that it would be upheld at 13-14% for FY25, with the bank aiming for double-digit growth in retail, agricultural, micro, small, and medium enterprises (MSME), as well as corporate credit segments.

The bank posted a 24% rise in its net profit to ₹808.10 crore during the January-March quarter of FY24, up from ₹650.07 crore in the corresponding period of the previous year, driven by strong growth in core earnings and a decrease in provisions.

Quarter-on-quarter (QoQ), the net profit surged by 12% from ₹722.56 crore in the third quarter of FY24.

The bank’s total income saw a notable increase of 37.43% to ₹9,112.67 crore compared to the same period last year, with net interest income (NII) climbing by 27.67% to ₹6,629 crore. Meanwhile, other income escalated to ₹2,477 crore from ₹1,430 crore in the corresponding period.

Also Read | Indian Overseas Bank targets 13-14% credit growth next year, plans fundraise

The market capitalisation of Indian Overseas Bank is around ₹1,17,383.98 crore. Its shares have gained close to 153% in the past year.

(with input from Business Standard)

For the entire interview, watch the accompanying video

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow