GuruFocus – Release Date: January 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Indian Overseas Bank (NSE:) (BOM:532388) reported a significant year-on-year net profit growth of 20.89%, reaching INR 874 crore.
- The bank’s provision coverage ratio improved to 97.07%, indicating strong asset quality management.
- Capital adequacy ratio stood at 16.97%, well above the regulatory requirement of 11.50%, showcasing financial stability.
- Net interest income increased by 16.31% year-on-year, driven by growth in advances and improved margins.
- The cost-to-income ratio reduced to 44.55%, reflecting improved operational efficiency.
Negative Points
- Interest expenses increased by 14.43% year-on-year due to growth in deposit levels and borrowings.
- Corporate credit declined by 19.63%, indicating challenges in the corporate lending segment.
- The bank faced a tax expense increase due to the reversal of deferred tax assets and provisions for income tax at overseas branches.
- There is a significant contingent liability related to tax disputes amounting to approximately INR 5,000 crore.
- The cost of deposits increased to 5.08% from the previous year’s 4.82%, impacting overall cost management.
Q & A Highlights Q: Can you explain the significant increase in other interest income this quarter compared to the last quarter?
A: The increase in other interest income is primarily due to the recovery from technical return of accounts, which is recorded under other income. Additionally, there was an interest income from an income tax refund.
Q: There is a substantial contingent liability related to tax disputes. Can you provide an update on this issue?
A: We have made significant progress in resolving these tax disputes. The contingent liability has reduced from INR 10,000 crore to INR 5,014 crore, with INR 4,100 crore already resolved in our favor. We remain confident that the remaining disputes will also be settled favorably without the need for provisions.
Q: What is the reason for the loss in the value of investments noted in your financials?
A: The loss pertains to the consolidation of accounts, specifically related to our Regional Rural Bank (RRB) investments. This adjustment is made during the consolidation process and does not affect our standalone accounts.
Q: What are your plans regarding your stake in Universal Sompo, where you hold an 18.06% stake?
A: We plan to maintain our current stake in Universal Sompo for the immediate future and have no immediate plans to increase or decrease our holding.
Q: Can you provide insights into your credit and deposit growth targets for the fiscal year?
A: We initially targeted a 13% growth in both credit and deposits for the fiscal year. As of now, we have achieved approximately 9.5% growth in both areas. We are confident of reaching our 13% growth target by the end of the fiscal year. Our strategy includes reducing high-cost bulk deposits while increasing CASA and retail term deposits.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
