Indian Overseas Bank, Union Bank, Bank of Maharashtra: What early Q3 FY26 numbers signal for PSU banks

Indian Overseas Bank

State-owned Indian Overseas Bank (IOB) on Wednesday reported a 56.2% jump in net profit at ₹1,365 crore for the third quarter ended December 2025 as bad loans reduced and core business improved.

The Chennai-based lender had earned a net profit of ₹874 crore in the same quarter a year ago.

Total income increased to ₹9,672 crore during the quarter under review from ₹8,409 crore in the same period last year, IOB said in a regulatory filing.

Operating profit of the bank improved to ₹2,603 crore from ₹2,266 crore logged in the December 2024 quarter. Interest income also rose to ₹8,172 crore from ₹7,112 crore.

Net Interest Income (NII) grew 18% to ₹3,299 crore in Q3FY26 as against ₹2,789 crore in Q3FY25.

On the asset quality front, the bank's gross non-performing assets (NPAs) declined to 1.54% of gross loans by the end of December 2025 from 2.55% a year ago.

Similarly, net NPAs, or bad loans, came down to 0.24% as compared with 0.42% in FY25.

Gross NPA represents a bank’s total bad loans before provisioning, while Net NPA reflects the residual stressed assets after deducting provisions, indicating the bank’s actual credit risk.

The Capital Adequacy Ratio (CAR) of the bank moderated to 16.3% as against 16.97% at the end of the same quarter a year ago.

CAR is a measure of how much financial cushion a bank has to absorb losses, showing whether it has enough capital to remain safe while lending money.

In simple terms, it tells you how strong a bank is and whether it can handle unexpected loan losses without failing.

The provision coverage ratio of the bank as of December 31, 2025, stood at 97.49% as compared to 97.07% at the end of December 31, 2024.

The total business of the bank rose 18.7% to ₹6.44 lakh crore as compared to ₹5.42 lakh crore, an increase of ₹1.01 lakh crore in absolute terms.

The bank's total advances during the quarter increased 24% to ₹2.94 lakh crore, while total deposits witnessed growth of 14.5% at ₹3.94 lakh crore at the end of December 2025.

Union Bank of India

Union Bank of India reported a 9.7% increase in consolidated net profit for the December quarter at ₹5,073 crore, helped by a sharp fall in provisions.

The bank's core net interest income (NII) grew 0.95% to ₹9,328 crore on the back of a lower than the banking system's 7.13% growth in credit and a 0.15% narrowing in the net interest margin (NIM) at 2.76%.

Net Interest Margin (NIM) is a measure of a bank’s core profitability, showing how much it earns from lending after paying interest on deposits.

In simple terms, it tells you how efficiently a bank is making money from its loans—the higher the NIM, the better the bank’s earning power.

Its deposit growth came at 3.36%, also much lower than the banking system's growth.

The non-interest income for the reporting quarter increased 2.82% to ₹4,541 crore.

The bank's Managing Director and Chief Executive, Asheesh Pandey, said shedding over ₹40,000 crore of bulk deposits and ₹20,000 crore in the inter-bank participation certificates (IBPC) market have tempered the deposit and credit growth numbers, respectively.

The bank is more keen on profitability than just growing the overall business, Pandey said.

The CEO also said the bank has adopted a newer method of computing certain important numbers like cost of deposits and yield on advances in favour of "efficiencies", but declined to share the net interest margin (NIM) number under the older system of computation.

The fresh slippages declined to ₹1,820 crore from ₹2,199 crore in the year-ago period, and the gross non-performing assets ratio improved to 3.06% from the 3.29% in the quarter-ago period.

Its overall provisions declined sharply to ₹322.23 crore from the ₹1,599 crore in the year-ago period, becoming one of the major reasons for the profit growth.

Pandey said the provisions were lower because of the high provision coverage ratio at 95% and lower slippages.

Provision Coverage Ratio (PCR) shows how much of a bank’s bad loans are already covered by provisions set aside for potential losses.

In simple terms, a higher PCR means the bank is better prepared to absorb losses from NPAs, making its balance sheet safer.

Bank of Maharashtra

Bank of Maharashtra (BoM) posted a 26.5% rise in net profit to ₹1,779 crore for the third quarter ended December 2025, with rising interest income.

The Pune-based lender had posted a net profit of ₹1,406 crore in the October-December period a year ago.

Total income increased to ₹8,277 crore during the quarter under review from ₹7,112 crore in the same period the previous year, BoM said in a regulatory filing.

The bank earned an interest income of ₹7,344 crore during the quarter compared to ₹6,325 crore a year ago.

Net Interest Income (NII) grew 16 per cent to ₹3,422 crore in Q3FY26 as against ₹2,943 crore in Q3FY25.

The board has approved an interim dividend of 10% on the equity shares of the bank, i.e., ₹1 per share having a face value of ₹10 each for the financial year 2025-26, BoM Managing Director and CEO Nidhu Saxena said during a media interaction.

The bank was able to reduce gross Non-Performing Assets (NPAs) to 1.60% of gross loans by the end of December 2025 from 1.80% in the year-ago period.

Similarly, net NPAs, or bad loans, came down to 0.15% from 0.2% at the end of the third quarter of the previous fiscal year.

As a result, the bank's provision and contingencies declined to ₹728 crore as against ₹841 crore in the same period a year ago.

However, CAR of the bank witnessed moderation at 17.06% as compared to 18.71% at the end of the third quarter of the previous year.

At the same time, the Net Interest Margin (NIM) of the bank also declined to 3.88% from 3.98% at the end of December 2024.

To sum up

The state-owned banks reported an encouraging set of numbers for the quarter under review. The banks reported a rise in profitability and a decline in bad loans.

Banking Sector in 2026

Anil Gupta, Senior Vice President, Co Group Head - Financial Sector Ratings, ICRA Ltd, said that 2025 tested the resilience of banks with margin pressure and rising delinquencies in unsecured loans. As the rate-cut cycle nears an end and underwriting norms tighten, 2026 is poised for improved asset quality and profitability for banks.

Capital markets, despite a moderation in retail participation, remain buoyant, supporting strong earnings for broking firms.

The insurance sector gained momentum from GST rate cuts. Policy initiatives to drive deeper penetration will continue to support growth in this sector.

"Overall, with regulatory support and accelerating digital adoption across financial services, 2026 promises stability and sustainable expansion for banks, insurers, and market intermediaries," Gupta added.