ICICI Bank Ltd Q1 FY2024 Concall Summary

Key Takeaways

• NIM compression as expected, full-year guide held: NIM fell to 4.78% from 4.90% QoQ on lagged deposit repricing, but management expects FY24 NIM to be broadly similar to FY23.
• Deposit cost pressure has a visible runway: Cost of deposits rose to 4.31% and will keep rising for the next couple of quarters, after which the repricing impact should have largely played out.
• Asset quality seasonality, not deterioration: Gross NPA additions of ₹5,318 crore were driven by seasonal Kisan Credit Card stress and the absence of large corporate recoveries that flattered earlier quarters; management expects normalisation.
• Unsecured book growing fast, no risk filter dilution: Personal loans grew 38% and credit cards 45% YoY, with management comfortable on quality given 60% of these customers are known to the bank and filters remain unchanged.
• What to watch next quarter: Whether deposit cost increases begin to plateau, the pace of Kisan Credit Card normalisation, and any movement on the pending regulatory application to raise the ICICI Lombard stake back above 50%.

Margin Trajectory & Deposit Repricing

• The Q1 NIM walk: NIM fell 12 bps QoQ to 4.78% as the lagged impact of deposit rate increases over the last year fed into cost of deposits, partly offset by higher loan and investment yields.
• Why last year was exceptional: FY23 saw a one-off NIM expansion because repo-linked home loans repriced faster than fixed-rate deposits of longer duration; that effect is now normalising.
• Cost of deposits still climbing: Cost of deposits rose to 4.31% from 3.98% a year ago, and management expects it to continue increasing for the next couple of quarters as prior-period deposits mature and reprice, and as the deposit base itself grows.
• Incremental deposit rates stabilising: Rates on incremental retail term deposits have largely stabilised, and wholesale deposit rates have moderated, suggesting the pressure is from the stock, not the flow.
• Repo-rate tailwind fading: The quarter got some benefit from the last repo hike as the portfolio repriced over reset dates, plus repricing of the floating-rate bond portfolio; if the repo rate stays where it is, those benefits will not recur in subsequent quarters.
• Full-year NIM guide: Management expects FY24 NIM to be broadly at a similar level as FY23, and frames NIM as just one lever driving core operating profit, not something to optimise in isolation.

Batra: "We do expect the full year NIM for this year to be broadly at a similar level that was there in FY'23."

Deposit Franchise & Liability Strategy

• Term deposits surge on rate gap: Term deposits grew 25.8% YoY as the delta between savings and term deposit rates widened, causing customers to shift funds naturally; CASA grew ~9% YoY.
• Management looks at total liability cost, not CASA ratio: The bank focuses on overall cost of deposits and total money in the bank rather than the CASA percentage, treating the mix shift as a rational customer response to rate signals.
• Retail remains the prime driver: Retail deposits continue to drive deposit growth, with wholesale flows present but the proportion unchanged at 75–80% retail.
• ₹2,000 note withdrawal a non-event: The bank got a fair share of deposits from the note withdrawal, but it did not have a very big impact on overall accretion for the quarter.
• Deposit repricing visibility is limited: Management declined to quantify how much of the deposit book has already repriced, citing the interplay of scheduled maturities, premature repayments and the growth in the deposit base itself.

Banerjee: "I don't want to talk about the level, but we will see the cost of funds continue to increase I would guess, for the next couple of quarters. And by then, the repricing impact should have largely taken place."

Asset Quality: Seasonal Stress, Not Structural

• Kisan Credit Card drives the NPA uptick: Gross NPA additions of ₹5,318 crore partly reflect seasonal stress in the Kisan Credit Card book, which typically sees higher additions in Q1 and Q3 of a fiscal year; management expects this to normalise as the year progresses.
• Corporate recoveries absent: Earlier periods benefited from corporate recoveries and upgrades that are no longer present, making the Q1 addition number look worse on a relative basis.
• Write-offs steady: Write-offs of ₹1,169 crore are consistent with the prior quarter (₹1,158 crore) and the full-year FY23 trend (₹4,400 crore), reflecting policy-driven recognition, not a spike.
• BB and below book shrinking: The BB and below rated portfolio declined to ₹4,276 crore from ₹4,704 crore at March 2023 and ₹8,209 crore at June 2022, while the builder portfolio rated BB and below or NPA fell to 3.8% from 4.6% QoQ.
• Resolution portfolio declining: Total fund-based outstanding under resolution fell to ₹3,946 crore (0.4% of loans) from ₹4,508 crore.
• Provisions reflect the seasonality: Total provisions of ₹1,292 crore (9.3% of core operating profit) included the seasonal Kisan Credit Card impact and lower write-backs from corporate recoveries relative to recent quarters.

Batra: "This is a little bit seasonal, given the fact that in the Kisan Credit Card book on the rural lending, there is normally a bit of increase in NPAs and provisions during the quarter, which should normalise as we go along."

Loan Growth & Corporate Strategy

• Retail engine still strong: Overall retail loan book grew 21.9% YoY, with home loans up 16.6% to ₹3.556 lakh crore; the bank looks at the customer holistically rather than targeting specific product growth rates.
• Domestic corporate growth healthy: Domestic corporate grew 19.3% YoY, but the capex cycle is largely funded by government and PSUs; private sector capex remains light, with most corporates funding brownfield investments from internal accruals.
• Corporate pricing discipline: The bank deliberately grew its corporate book slower than peers last year on pricing concerns; as the liquidity environment tightened, pricing improved somewhat, and the bank is now seeing better opportunities.
• Overseas book shrinking by design: The overseas loan book de-grew 29.5% to ~₹32,000 crore, in line with the recalibrated international strategy focusing on NRIs, MNCs doing business in India and trade, not overseas loan growth.
• Ecosystem approach, not just corporate loans: The bank's corporate strategy is holistic, covering dealers, vendors, export finance and employees, not just the corporate loan book; management declined to disclose a pipeline figure, saying it does not look at it that way.
• NBFC/HFC portfolio growth: Sequential increase mainly due to disbursements to entities with long vintage and those owned by well-established corporate groups.

Batra: "When we say things have to be 'Fair to the customer and fair to the Bank', if things are not really in the interest of our shareholders, we may not be doing the deal."

Unsecured Lending: Growth With Guardrails

• High growth, no filter dilution: Personal loans grew 38% YoY and credit cards 45% YoY; management denied any large-scale moderation of risk filters, noting that 60% of these customers are known to the bank and a large portion are salaried with stable income.
• Competitive intensity keeping rates low: Unsecured personal loan rates have not moved up despite the rate cycle; the segment is competitive with many players entering, and rates are at "probably pretty low level" with no immediate move up expected, although management thinks ideally they should.
• Calibrated approach, no growth targets: The bank has no specific growth targets for unsecured lending; it focuses on meeting customer needs within its return-of-capital framework, using digital delivery and ecosystem insights.

Banerjee: "I think it has been quite competitive, and rates have not moved up. So, I don't see immediate sort of move up in rates... today, the rates are at probably pretty low level, but I don't see them increasing much from here, although probably ideally they should."

Investments, Expenses & Operating Leverage

• Employee costs surge on hiring and increments: Employee expenses rose 36.3% YoY due to annual increments, promotions and an increase of ~27,650 employees over the last 12 months, with significant additions in H2 of last year and further hiring in Q1.
• Non-employee expenses also rising: Non-employee expenses rose 19.5% YoY, primarily driven by retail business related expenses and technology expenses.
• No operating leverage timeline: Management declined to give a timeline or guidance on when operating expense growth moderates, stating it does not look at it that way; the bank continues to invest in franchise growth and expects new hires to contribute to revenues at some point.
• Branch expansion continues: Branch count increased by 174 in Q1 to 6,074 branches; reasonable to expect continued growth, but the strategy is bottoms-up, driven by internal assessment, not a fixed target.
• Subsidiary moves framed as non-strategic: The decision to increase the ICICI Lombard stake back above 50% (regulatory application pending) and the Scheme of Arrangement to make ICICI Securities a wholly-owned subsidiary were described as not fundamentally strategic changes.
• Capital adequacy movement: CET1 of 16.66% was impacted sequentially by the redemption of AT1 bonds (~₹4,000 crore) and the Q1 roll-forward of operational risk RWA based on the average of the previous three years' gross income.

Guidance & Commitments

Key Metrics