IOB becomes fifth PSU bank to hit ₹1 lakh cr mcap; stock price doubles in 6 months

Indian Overseas Bank (IOB) on Friday achieved a significant milestone by becoming the fifth public sector lender to hit ₹1 lakh crore market capitalisation, driven by sustained rally in its share price in the last six months. Since December 2023, two state-owned banks - Union Bank of India and Punjab National Bank – reached the ₹1 lakh crore mark, joining the league of State Bank of India and Bank of Baroda.  

State Bank of India (SBI), the country's largest lender by assets, tops the chart with the market capitalisation (mcap) of ₹5.81 lakh crore, followed by Punjab National Bank (PNB) with ₹1.37 lakh crore. The mcap of Bank of Baroda (BoB) and Punjab National Bank (PNB) currently stand at ₹1.32 lakh crore, and ₹1.10 lakh crore.

On Friday, IOB shares opened higher for the third consecutive session and gained as much as 7.9% to hit a fresh 52-week high of ₹56.22 on the BSE. At the time of reporting, IOB shares were trading at ₹54.11, up 3.9%, with a market capitalisation of ₹1.02 lakh crore.

In the last six months, shares of IOB has surged 106% from ₹26.25 on August 2, 2023, while it has jumped 102% in the past 12 months. The share price of PSU bank has soared 170% against its 52-week low of ₹20.87 touched on March 28, 2023.

Overall, shares of public sector banks have witnessed a strong rally in the last one month, with the Nifty PSU Bank index rising more than 14% during this period, outperforming benchmark Nifty50. The Nifty PSU Bank index has maintained an uptrend for the last seven consecutive sessions and gained over 15% during this period, hitting a fresh all-time high level of 6,696.

The positive momentum in the PSU bank stocks has been driven by their healthy third quarter earnings figure. Among the public sector banks, Bank of Baroda, Canara Bank, Union Bank, Indian Bank, Central Bank of India, IDBI Bank, and Bank of Maharashtra have released their December quarter numbers, while SBI and others are lined up to unveil their financial results this month.

In the first half of the current fiscal (H1 FY24), the combined profit of 12 PSU lenders stood at ₹68,061 crore, a jump of 66% over H1FY23's profit of ₹40,991 crore. In Q2 FY24, the 12 PSU lenders registered 31% growth in net profit at ₹33,643 crore compared to last year.

IOB posts strong earnings in Q3

IOB released its December quarter earnings on January 24, showing that its net profit rose 30% year-on-year (YoY) to ₹723 crore in Q3 FY24, aided by improved core income and reduced bad loans. The total income of the Chennai-based lender rose ₹6,176 crore over ₹5,056 crore for the quarter ended December 2022.

The net interest income stood at ₹6,176 crore versus ₹5,056 crores in Q3 FY23, while Non-interest income increased to ₹1,262 crore from ₹950 crore in the three months ended December 31, 2022.

On the asset quality front, the bank's gross Non-Performing Assets (NPAs) declined to 3.90% of gross loans by the end of December 2023 from 8.19% a year ago. The net dropped to 0.62% as compared to 2.43% in FY22. The provisions for bad loans declined to ₹367 crore from ₹711 crore a year ago.

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