Why IOB Share Price is Rising

So far in 2024, the Nifty PSU Bank index has surged 16.6%.

This remarkable increase can be attributed to a sharp decline in bond yields which is expected to positively impact the treasury portfolios of PSU bank.

The stocks of various PSU banks also rallied recently after the government announced the Union Budget for 2024-25.

Continuing this rally, Nifty PSU Bank rallied 2.2% today, marking a 1.8% gain in the subsequent two trading sessions.

Amidst the backdrop of this ongoing rally, shares of Indian Overseas Bank have surged by approximately 77% in the past month. Here's why.

#1 Robust Q3 Numbers

Shares of Indian Overseas Bank (IOB) jumped after the bank announced its results for the December 2023 quarter.

The bank reported a 24% YoY rise in total income at Rs 74.4 bn against Rs 60.1 (billion) bn in the year ago period.

It also reported a 30% YoY rise in net profit at Rs 7.2 bn against Rs 5.5 bn in the same period in FY23. The state-run lender attributed the growth to a rise in income and improved asset quality.

Interest income for the quarter rose to Rs 61.8 bn, a notable increase from Rs 50.6 bn in the same period in 2022. The net interest margin was reported at 3.1%, compared to 3.3% in the December 2022 quarter.

IOB's total business expanded to Rs 4.9 tn as of December 2023, up from Rs 4.3 tn in December 2022. Total deposits for Q3 increased to Rs 2.8 tn, compared to Rs 2.6 trillion in December 2022.

The Current Account Savings Account (CASA) grew to Rs 1.2 tn, representing 43.5%, compared to Rs 1.2 tn and 44.5% in December 2022.

The bank's gross non-performing assets (GNPA) showed notable improvement, decreasing to 3.9%, compared to 8.2% in December 2022. Net NPA for the quarter stood at 0.6%, a substantial improvement from 2.4% in the corresponding quarter of the previous fiscal year.

The bank's provision coverage ratio also saw an increase to 96.9%, up from 91.3% in December 2022.

#2 Debt Recovery initiative

Indian Overseas Bank (IOB) has decided to sell loans in the SME segment comprising 41 accounts worth Rs 2.1 bn.

The bank is looking to recover 60% of the debt. It has invited potential buyers to submit offers, with 20% in cash and 80% in security receipts (SR).

This upfront cash payment contributes to the recovery of the outstanding debt, providing the bank with immediate funds.

Bidders are expected to offer a 5% mark-up on 20% cash and 80% SR base bid, with preference for bids with a higher cash portion.

The cash component is Rs 26.4 while the SR portion is Rs 105.6, and the total recovery expectation is Rs 1.3 bn, which is 60% of the outstanding book value.

The initial amount for a counter bid is set at Rs 1.3 bn, a 5.34% mark-up from the binding bid amount of Rs 1.2. This is on a basis of 20% cash and 80% SR.

This structured sale of bad loans with immediate cash, security receipts, competitive bidding, and counter-bidding has created a comprehensive approach to debt recovery, driving the stock higher.

What Next?

Looking into the future, Indian Overseas Bank (IOB) envisions a continual reduction in net Non-Performing Assets (NPA), demonstrating a firm commitment to managing slippages and upholding stringent control over asset quality. The bank is optimistic about the forthcoming financial year, projecting a credit growth of 13-14%.

Additionally, after a break of about eight years, the Indian Overseas Bank (IOB) is working to scale up its footprint by adding about 40-50 branches.

Prospects in the retail sector are promising, with a strategic focus on housing and jewel loan segments. IOB anticipates significant growth in its jewel loan portfolio, which currently stands at Rs 390 bn, having expanded 3.5 times over the past four years.

How Shares of IOB have Performed Recently

The IOB stock rose around 192% in the past one year. Over a month, the share price has gained by 77%.

IOB share price touched its 52-week high price of Rs 79.9 on 7 February 2024. Its 52-week low was Rs 20.9 touched on 28 March 2023.

The company is currently trading at a PB (price to book value) multiple of 4.8 times.

About IOB

Indian Overseas Bank (IOB) is one of oldest and major Public Sector banks in India.

It is an Indian public sector bank. It has about 3,220 domestic branches, 2 DBUs (Digital Banking Unit) about 4 foreign branches and representative office.

Founded in February 1937 by M. Ct. M. Chidambaram Chettyar with twin objectives of specialising in foreign exchange business and overseas banking, it has created various milestones in Indian Banking Sector.

During the nationalisation, IOB was one of the 14 major banks taken over by the government of India.

For more details, see the Indian Overseas Bank company fact sheet and quarterly results.

You can also compare IOB with its peers:

IOB vs UCO Bank

IOB vs ICICI Bank

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