ICICI Bank (NS:ICBK) has emerged as a standout performer in the first quarter of FY25, reporting a robust profit after tax (PAT) of Rs 110.6 billion. This marks a 3% increase quarter-on-quarter and a 15% rise year-on-year, reflecting strong fundamentals and strategic management. Unlike many private peers that faced negative surprises, ICICI's stable net interest margins (NIMs), increased non-interest income, controlled operating expenses, and modest credit costs contributed to its impressive results.
ICICI Bank demonstrated robust loan growth of 3.3% QoQ, with segments such as retail, SME, and corporate loans showing healthy increases. Retail loans grew by 3.2%, SME loans by 4%, and corporate loans by 3.1%. In contrast, deposit growth was more modest at 0.9% QoQ, with a 2% decline in the Current Account Savings Account (CASA) ratio, which settled at 40.9%—still a favorable position compared to peers.
Management remains optimistic about maintaining current growth and asset quality, with no significant stress observed in the retail unsecured portfolio—a concern for some competitors. Regarding new Liquidity Coverage Ratio (LCR) regulations, ICICI anticipates a 10% hit to its LCR but is still formulating a response.
Bank of America (NYSE:BAC) (BoFA) highlighted ICICI's exceptional performance, leading to a reiterated Buy rating and a revised price objective of INR 1,450 (up from INR 1,400). The bank's valuation at 2.3-2.4 times FY26 estimated standalone price-to-book (P/B) ratio offers an attractive risk-reward profile, with potential for further valuation expansion driven by better visibility on earnings drivers.
Hits and Misses: A Balanced Scorecard
Hits:
1. Broad-Based Loan Growth: Retail loans up 3.2%, SME loans up 4%, and corporate loans up 3.1%.
2. Stable Asset Quality: The gross non-performing asset (GNPA) and net NPA ratios remained stable, with minor seasonal slippages in the agricultural book.
3. Controlled Operating Expenses: Operating expense growth decelerated, enhancing overall financial performance.
Misses:
1. Modest Deposit Growth: Deposits grew by only 0.9% QoQ, with CASA declining by 2% QoQ.
2. CASA Ratio: Despite the decline, the CASA ratio at 40.9% remains competitive.
ICICI Bank expects continued healthy loan growth, stable NIMs until rate cuts occur, moderate operating expense growth, and credit costs remaining between 50-60 basis points. Positive surprises in the quarter included robust loan growth (3.3% QoQ/15.7% YoY) and higher non-interest income (24% QoQ/29% YoY), alongside controlled operating expenses, resulting in a lower cost-to-income ratio of 39.7%.
The bank added 64 branches in Q1 FY25, expanding its network to 6,587 branches, and continues to focus on enhancing its product and distribution in the personal loan and credit card segments. Despite facing elevated competition in corporate lending, ICICI remains opportunistic and aims to maintain a loan-to-deposit ratio (LDR) of 80-85%.
Also Read: Here’s How to Find High Momentum Stocks
X (formerly, Twitter) - Aayush Khanna