Overview

ICICI Bank is India’s second-largest private sector bank with a diversified presence across retail and corporate banking, SME/business banking, rural finance, and strong subsidiaries in insurance and securities. Over the last few years, it has executed a measured, risk-calibrated growth strategy: building a granular deposit base, prioritizing higher-return segments (business banking, mortgages, cards, and personal loans), and maintaining robust capital and provisioning buffers. The result is a franchise that consistently generates high core profitability with industry-leading asset quality.

Business Mix & Competitive Position

• Granular retail engine: Retail loans form just over half of the book; within retail, mortgages are the anchor product, complemented by vehicles, personal loans, and credit cards. Business banking (SME) has been a fast-growing profit pool for the bank.
• Sensible asset-liability profile: A stable CASA base and calibrated term deposits support funding. Average CASA ratio stood at 38.7% in Q1 FY26.
• Capital strength and buffers: CET1 stood at 16.31% and total capital adequacy at 16.97% at June 30, 2025, including current-period profits—comfortably above regulatory minimums, providing growth optionality.

Recent Financial Performance (Q1 FY26, quarter ended 30 June 2025)

ICICI Bank’s latest quarter underscores steady operating momentum:

• Earnings growth: Profit after tax rose 15.5% YoY to ₹127.7 bn. Core operating profit grew 13.6% YoY to ₹175.1 bn.
• Net interest income (NII): ₹216.35 bn, up 10.6% YoY, supported by healthy loan growth and resilient margins. NIM was 4.34% (annualized).
• Non-interest income: ₹72.64 bn (+13.7% YoY), with stable fee income and higher dividends from subsidiaries.
• Cost discipline: Cost-to-income at 37.8% (vs. 39.7% in Q1 FY25), reflecting operating leverage.
• Deposits & loans: Total deposits grew 11.2% YoY on averages. Domestic loans were up 12.0% YoY, driven by business banking (+29.7% YoY), mortgages, and steady retail momentum.

What it means: The bank continues to deliver high-quality, broad-based growth without stretching on either costs or risk—hallmarks of a well-run private bank.

Asset Quality

• Best-in-class ratios: Gross NPA ratio at 1.67% and Net NPA ratio at 0.41% as of June 30, 2025. Provision coverage stood at 75.3%. Net additions to GNPA were modest, with provisions at ₹18.15 bn (0.53% of average advances).
• Buffers beyond NPAs: The bank also carries standard, contingency and other provisions of ₹226.6 bn (about 1.7% of advances), offering cushion against cyclical stress.

Takeaway: Asset quality is a strategic strength. Low net NPA and sizable contingent provisions reduce downside risk and smooth earnings through cycles.

Profitability & Return Ratios

• NIM (Q1 FY26 annualized): 4.34%—healthy despite a higher-rate environment and competition for deposits.
• ROA/ROE (Q1 FY26 annualized): ROA 2.44%, ROE 17.1%—among the strongest in the sector, indicating efficient capital deployment and risk-calibrated growth.

Capital Adequacy

The CET1 ratio of 16.31% and total CAR of 16.97% provide ample headroom to fund credit growth, absorb shocks, and invest in technology and distribution without dilutive capital raises.

Growth Drivers to Watch

1. SME/Business Banking: A structurally attractive segment for yields and fee income; ICICI is scaling this with prudent underwriting. (Portfolio up ~30% YoY.)
2. Mortgage-led retail core + unsecured legs: Mortgages anchor growth and stability; calibrated growth in personal loans and cards supports NIM and fee income.
3. Digital operating model: Distribution, analytics, and straight-through processing lower costs and improve risk selection—reflected in the cost-to-income trend.
4. Subsidiaries: Dividends/strategic synergies from insurance and capital markets arms enhance consolidated profitability. (Dividend income lifted non-interest income in Q1 FY26.)

Key Risks

• Deposit competition: System-wide competition for term deposits may pressure funding costs and NIM if rates stay elevated. (Cost of deposits: 4.85% in Q1 FY26 vs 5.00% in Q4 FY25.)
• Consumer credit cycles: Faster-growing unsecured retail can amplify credit costs in a downturn; ICICI mitigates this with stronger provisioning and analytics but it remains a watch area.
• Macro sensitivity: A sharp slowdown or policy shock can affect loan growth and fee pools across retail/corporate.

Valuation: Where Does ICICI Bank Trade?

• On the NSE, ICICI Bank recently traded around ₹1,427 per share (mid-Aug 2025), implying a market cap near ₹10.2 lakh crore.
• This translates to roughly 3.2–3.3× Price-to-Book (P/B) on the latest book value base—broadly consistent with public trackers. For reference: Screener/Smart-Investing peg P/B near ~3.2–3.3×; the US-listed ADR (IBN) also implies a P/B around ~3.1×.

Interpretation: A premium multiple is justified by high ROA/ROE, low NPAs, and growth visibility. Re-rating room exists if ROE sustains >18% with stable NIMs and continued deposit granularity; conversely, sharp NIM compression or credit cost surprises could cap multiples.

Investment View (Not Investment Advice)

Thesis in one line: ICICI Bank combines quality (asset strength, provisioning, capital) with quantity (consistent core growth), delivering sector-leading profitability—and the valuation premium largely reflects that.

What to track next:

• Deposit momentum vs. cost (CASA stability, term deposit repricing).
• Mix-led margin path (share of repo-linked assets, unsecured growth vs. mortgages).
• Credit costs in retail unsecured and SME, and any macro-linked stress.
• Capital deployment and subsidiary dividends to support consolidated ROE.

Bottom line: For long-term investors seeking a high-quality private bank, ICICI Bank remains a core candidate. Its combination of strong capital, low NPAs, robust core profitability, and disciplined growth supports sustained value creation—provided funding costs remain contained and underwriting stays conservative.

Quick Stats (Q1 FY26 snapshot)

• NIM: 4.34%; Cost-to-income: 37.8%; ROA: 2.44%; ROE: 17.1%.
• GNPA/NNPA: 1.67% / 0.41%; PCR: 75.3%.
• Core operating profit: ₹175.05 bn (+13.6% YoY).
• CET1 / Total CAR: 16.31% / 16.97%.

Sources: Key data are drawn from ICICI Bank’s official Q1 FY26 investor presentation and press/financial releases.

Disclaimer: This article is for educational purposes only and is not investment advice. Markets involve risk. Please do your own research or consult a registered advisor before investing.

Also read: Will Tata Elxsi Shares Bounce Back in 2025? Expert Analysis

For more knowledge on Fundamental Analysis of a Share, read this:

Fundamental Analysis Shares : Become An Intelligent Investor Paperback – 1 January 2019

by Khushboo Gala (Author), Ankit Gala (Author)