PB Fintech's net profit grew by 43% in the second quarter of fiscal year 27

Indian Overseas Bank (IOB), based in Chennai, reported a 56% increase in net profit during the second quarter of the fiscal year 27, reaching 1963 crore rupees. This growth compared to 1259 crore rupees in the quarter from July to September of fiscal year 26, and is attributed to increased interest income and improved asset quality.

The bank's total income for the reporting period increased by 13%, amounting to 10,428 crore rupees. IOB's interest income in Q2 FY27 rose by 17% to 9,201 crore rupees, compared to 7,851 crore rupees in the same period last year.

Ajay Kumar Srivastava, Managing Director and CEO of IOB, noted that net interest income grew by 26% during the quarter. He also highlighted the good asset quality and low write-off levels in the system.

Net Interest Income (NII) for the quarter increased by 26.4% to 3,867 crore rupees, compared to 3,059.3 crore rupees a year earlier. Srivastava added that write-offs remained under control at 240 crore rupees, and the provisioning ratio was only 0.07%, which is one of the lowest in the banking system, and the bank consistently maintains this figure.

The Non-Performing Asset (NPA) ratio decreased by 64 basis points (bps) year-on-year (Y-o-Y) to 1.19%, while the Net NPA ratio fell by 12 bps year-on-year to 0.16%. Credit costs also decreased by 1 bp year-on-year to 0.17%. During the quarter, 647 crore rupees were recovered against NPAs, which is 2.95 times higher than quarterly write-offs. The Capital to Risk-Weighted Assets Ratio (CRAR) increased by 66 bps year-on-year to 18.60%. Return on Assets (RoA) improved to 1.53% from 1.20% last year, which is 33 bps higher. Return on Equity (RoE) grew to 24.58% from 19.95% last year, an increase of 463 bps.

The bank's total deposits increased by 20.16% to 4.07 trillion rupees from 3.39 trillion rupees. Current Account Savings Account (CASA) deposits also grew by 20.73% year-on-year to 1.65 trillion rupees, and the internal CASA ratio improved by 13 bps year-on-year to 41.14%. The volume of loans disbursed in Q2 FY27 reached 3.45 trillion rupees, showing a growth of 24.35% compared to 2.77 trillion rupees last year.

Srivastava stated that, according to preliminary estimates, IOB will require additional provisioning of about 2,600–2,800 crore rupees under Expected Credit Losses (ECL). He clarified that the bank has already created ECL provisions of about 2,700 crore rupees, meaning that 100% of the required amount is already secured in the balance sheet as projected ECL reserves.

Furthermore, he mentioned the successful performance of the gold loan portfolio and the development of several programs to meet the needs of various segments of society with competitive interest rates. Srivastava added that the jewelry loan portfolio is very sound, with outstanding loans amounting to nearly 1.36 trillion rupees, and shows no signs of stress. The bank maintains a Loan-to-Value (LTV) ratio of about 60–62%, which adequately accounts for price fluctuations.

The private lender Federal Bank reported on Friday a 45 percent increase in net profit for the September quarter, reaching 1,386 crore rupees. This growth was driven by attracting funds amounting to $1.5 billion under the preferential scheme of Foreign Currency Non-Resident (FCNR)(B) swaps from the Reserve Bank of India (RBI).

The bank's net profit last year was 955 crore rupees, while in the previous quarter it reached 1,177 crore rupees. Despite reports of preliminary negotiations between the bank and Jana Small Finance Bank regarding a merger, CEO and Managing Director KVS Manian declined to give specific answers, merely noting that banks continue to show interest in opportunities for inorganic growth and are evaluating various options.

For the reporting quarter, net interest income increased by 26 percent, totaling 3,153 crore rupees. This resulted from a 22 percent growth in the loan portfolio and an expansion of the Net Interest Margin (NIM) by 0.26 percentage points to 3.32 percent. Manian stated that the bank aims for a quarterly increase in NIM of 0.05–0.06 percent.

He forecasts that the Reserve Bank of India (RBI) will conduct another three to four rate hikes over the next year, and that asset prices will be revalued faster than deposits. He noted that about 45 percent of the bank's loan portfolio is linked to external benchmarks. Furthermore, non-interest income rose to 1,490 crore rupees compared to 1,082 crore rupees a year earlier.

The attraction of $1.5 billion in deposits from the diaspora under the FCNR(B) scheme helped reduce dependence on large deposits, which contributed to the increase in net interest margin and asset financing. The bank also utilized the available leverage mechanism to finance retail assets worth 9,438 crore rupees. Federal Bank is cautious about the growth of the agricultural sector's loan portfolio but has not noticed a negative impact of the El Niño factor on its balance sheet.

Regarding the energy and infrastructure sectors, the bank remains reserved due to long-term demand for financing. A senior official noted that gold loans, which grew by 37 percent in the second quarter, could grow further, potentially increasing this sector's contribution to the total portfolio from the current 14.5 percent to 20 percent.

In terms of asset quality, new write-offs decreased to 420 crore rupees from 579 crore rupees a year ago, and the Gross NPA ratio reduced to 1.32 percent from 1.52 percent recorded three months ago. Manian mentioned that proposed distribution reforms by Irdai may affect the bank, and they are currently being evaluated.

The official added that the acquisition of a card portfolio from the foreign lender Standard Chartered will be completed by December, and this deal will add about 20 percent to the bank's card portfolio, with expected higher growth in the lending segment.

Overall capital adequacy stood at 16.84 percent in September compared to 16.97 percent in June. Federal Bank shares rose by 0.6 percent, closing at 337 rupees on the BSE, while the benchmark index showed a growth of 0.56 percent.