Indian Overseas Bank’s 56% profit growth needs a tax view

Indian Overseas Bank (NSE: IOB) reported Q2 FY27 net profit of ₹1,912 crore, up 56% year-on-year. Net interest income rose 26% to ₹3,867 crore, supported by strong credit growth and improved asset quality. What happened? The public-sector lender delivered a strong September-quarter performance. Advances: Gross advances grew 24.35% to ₹3.45 lakh crore. Deposits: Deposits increased 20% to ₹4.07 lakh crore. Net interest margin: Domestic NIM improved to 3.49%. Asset quality: Gross NPA declined to 1.19%, while net NPA stood at 0.16%. However, tax expense fell sharply to ₹154 crore from ₹501 crore a year earlier. This helped lift reported profit and means the 56% growth figure should not be treated as a direct measure of recurring operating improvement. My analysis The more meaningful signal is the combination of 26% growth in net interest income and improving asset quality. Credit growth is outpacing deposit growth, although the gap has narrowed compared with some high-growth lending cycles. If this momentum continues, IOB could benefit from stronger core earnings, provided it maintains funding discipline.