ICICI Bank Ltd.'s September-quarter results exceeded expectations, with net interest income rising 17.7% year on year and net profit increasing 20.1%. Brokerages remained positive on the bank's growth trajectory, cost discipline and asset quality, with JPMorgan raising its target price to Rs 1,800 from Rs 1,735. Citi, Jefferies, Kotak Securities and Bernstein also retained positive ratings, citing strong earnings momentum and the bank's ability to sustain profitability despite near-term margin pressure.
Net interest margin declined 18 basis points sequentially to 4.18%, largely due to the impact of FCNR-B deposits and a shift in the deposit mix towards term deposits. Net interest income nevertheless rose 3.92% sequentially, while pre-provision operating profit increased 18.94% year on year. JPMorgan expects margins to expand in the March quarter, while Citi expects them to bottom out in the December quarter before recovering.
Improving asset quality and lower provisions also supported the results. Gross and net non-performing asset ratios declined sequentially, while provisions fell 32% from the previous quarter. Management expects margins to remain under pressure in Q3 as the full impact of FCNR-B deposits comes through, followed by an improvement in Q4 as surplus liquidity is deployed. Weak CASA growth remains a concern, although brokerages highlighted strong balance sheet growth and the bank's execution.
ICICI Bank Q2 Highlights
- Net interest income rose 17.7% year on year and 3.92% sequentially to Rs 25,338.69 crore from Rs 21,529 crore.
- Pre-provision operating profit increased 18.94% year on year and 0.93% sequentially to Rs 20,575 crore from Rs 17,298 crore.
- Net profit rose 20.1% year on year and 0.26% sequentially to Rs 14,843.03 crore from Rs 12,359 crore.
- Provisions declined 32% sequentially to Rs 851 crore from Rs 1,260 crore.
- Net interest margin fell to 4.18% from 4.36% in the previous quarter, down 12 basis points year on year.
- Gross non-performing assets declined to 1.2%, down 18 basis points sequentially and 38 basis points year on year.
- Net non-performing assets fell to 0.3%, down five basis points sequentially and nine basis points year on year.
READ | ICICI Bank Eyes Agri-Provision Reversal In Next Two Quarters Pending RBI Nod, FCNR Cushions CASA Dip
Here's what brokerages are saying after ICICI Bank announced Q2 results
Citi
Maintained 'Buy'; Target Price At Rs 1,770
Said net interest income rose 4% sequentially and expects net interest margins to bottom out in Q3 before recovering.
Highlighted strong asset quality, with robust recoveries anchoring modest credit costs.
Said the surge in FCNR-B deposits supported net interest income but diluted margins.
Described ICICI Bank as an emerging growth leader, supported by wholesale and business banking.
Jefferies
Maintained 'Buy'; Target Price At Rs 1,750
Highlighted stronger net interest income growth.
Expects normalisation of the asset mix to support margin improvement.
Said strong asset quality and lower credit costs supported profitability.
Retained ICICI Bank among its top picks.
JPMorgan
Maintained 'Overweight'; Target Price Raised To Rs 1,800 From Rs 1,735
Described the quarter as a broad-based beat and expects net interest margins to expand in Q4.
Highlighted strong balance sheet growth and an improving retail mix.
Said asset quality performance remained strong, with no visible impact from geopolitical uncertainty.
Flagged weak CASA growth as a key negative.
Kotak Securities
Maintained 'Buy'; Target Price At Rs 1,800
Described the results and execution as exceptional, with earnings supported by growth, cost discipline and credit quality.
Said healthy CASA growth and lower credit costs, supported by fewer slippages, helped the bank deliver a return on equity of 17%.
Highlighted a strong foundation and fewer operating concerns as factors that could support superior execution.
Said its view was anchored by relative valuations, while ICICI Bank deserved a higher premium.
Bernstein
Maintained 'Outperform'; Target Price At Rs 1,800
Said the quarter reinforced ICICI Bank's position as the fastest-growing large private-sector bank.
Highlighted industry-leading growth and profitability.
Said net interest margin compression was in line with peers, while treasury losses weighed on net operating income.
Noted that contained operating expenses and lower credit costs supported profitability.
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