ICICI Bank Ltd Q1 FY2025 Concall Summary

Key Takeaways

• Steady quarter, normalization underway: PAT grew 14.6% YoY, but NIM compressed to 4.36% and credit costs are gradually normalizing from a benign cycle. Management sees NIMs as range-bound from here.
• Deposit and loan growth remain balanced: Average deposits grew 17.8% YoY and domestic loans 15.9% YoY, with the bank calibrating unsecured lending lower while business banking and SME grew over 23% each.
• Asset quality is normalizing, not deteriorating: Gross NPA additions rose to ₹5,916 cr, driven by seasonal KCC slippages and slower recoveries, but net NPA ratio held flat at 0.43% and adjusted credit cost stayed at ~50 bps.
• Other income got a one-time dividend boost: Non-interest income jumped on ₹894 cr in subsidiary dividends, while fee income grew a more modest 13.4% YoY. Treasury gains also benefited from new investment guidelines.
• What to watch next quarter: The pace of credit cost normalization as legacy recoveries wind down, the final LCR guidelines and their quantified impact, and whether personal loan growth slows toward the ~20% YoY target.

Margin & Profitability

• NIM compression is largely done: NIM fell to 4.36% from 4.40% QoQ and 4.78% YoY, driven by the RBI rate cycle. Management expects NIMs to be range-bound going forward, with the process of moderation largely complete.
• Cost of deposits still inching up: Cost of deposits rose to 4.84% from 4.82% QoQ. Wholesale rates did not ease in Q1 as they typically do, and one or two retail deposit rate hikes occurred during the quarter.
• Yield on advances declined slightly: Partly due to non-accrual on the KCC portfolio over a longer period, plus competitive pressure on lending rates, particularly in corporate, mortgages, and personal loans.
• OPEX growth is decelerating: Operating expenses grew 10.6% YoY, down from 19.0% in FY2024. Technology spend stayed at ~9.3-9.5% of OPEX, focused on resilience, scalability, and recovery capability.
• Profit before tax ex-treasury grew 11.8% YoY: Core operating profit grew 11.0% YoY, reflecting the bank's strategic focus on risk-calibrated profitable growth across its 360-degree customer franchise.

Banerjee: "What we mean by range-bound is that the process is largely done. And from here, we don't expect sharp movements."

Asset Quality & Credit Costs

• Gross NPA additions rose on seasonality, not stress: Additions of ₹5,916 cr (vs ₹5,139 cr QoQ) included ₹721 cr from KCC, which typically sees higher slippages in Q1 and Q3. Net additions rose to ₹2,624 cr from ₹1,221 cr QoQ.
• Recoveries are slowing as the legacy NPA pool winds down: Recoveries and upgrades fell to ₹2,933 cr from ₹3,217 cr QoQ in the retail, rural and business banking segment. The bank has been collecting from the FY21/FY22 NPA pool, and that pace is now coming off.
• Adjusted credit cost held steady at ~50 bps: Reported provisions of ₹1,332 cr included a ₹389 cr release of AIF-related provisions. Excluding that and KCC seasonality, the underlying credit cost remained consistent with the prior two quarters.
• Unsecured portfolio shows no specific stress: Personal loan growth has been moderated to 24.9% YoY from the high 30s, and credit card growth was 31.3% YoY. Delinquency levels are within internally defined risk parameters, and the combined portfolio is ~14% of total loans.
• Corporate and SME asset quality remains benign: Gross NPA additions in this segment were just ₹184 cr, and net deletions of gross NPAs were ₹175 cr. The BB and below rated portfolio declined to ₹5,286 cr from ₹5,528 cr QoQ.
• Provisioning coverage stays high at ~80%: Net NPA ratio was flat sequentially at 0.43%, and the bank holds ₹863 cr in provisions against a ₹2,735 cr standard resolution portfolio, above RBI requirements.

Banerjee: "I think we have been saying for some time that the pace of recoveries will vary and may not continue at the same pace, because we were still collecting out of the pool of NPAs that got created in fiscal '21 and fiscal '22. So, that pace will come-off and therefore, the credit cost will also normalize upwards."

Loan Growth & Portfolio Composition

• Domestic loans grew 15.9% YoY, led by business banking and SME: Business banking grew 35.6% YoY, SME 23.5% YoY, and rural 16.9% YoY. Retail grew 17.1% YoY, while domestic corporate grew a more modest 10.3% YoY.
• Personal loan growth is being deliberately slowed: YoY growth of 24.9% is down from the high 30s, reflecting ongoing calibration based on portfolio assessment, bureau data, and internal thresholds. Management expects YoY growth closer to 20% or lower by year-end.
• Corporate loan growth was QoQ-driven by NBFCs and real estate: The NBFC portfolio grew to ₹85,412 cr as prepayments did not occur this quarter, and the builder portfolio rose to ₹52,130 cr at decent pricing within risk thresholds. Competitive intensity in corporate lending remains high.
• Overseas book continues to shrink as a proportion: The strategic shift is toward serving NRI remittances, India-trade flows, fund flows, and entities setting up in India, with much of it non-fund-based.
• Domestic LDR expected to stay in the low-to-mid 80s: Management does not target a specific loan growth level and calibrates both deposit and loan growth to market conditions. Deposit growth on an average basis is higher than the system.

Banerjee: "We don't feel that as a constraint in terms of the available lending opportunities. On the lending side also, I think there is a price competition the other way and we are seeing fair amount of competition particularly on the corporate side. So, we will keep calibrating both."

Deposits, Liquidity & LCR

• Average deposit growth of 17.8% YoY was balanced with loan growth: Period-end deposits grew 15.1% YoY. Wholesale deposits remained sticky during Q1, while some banks increased retail deposit mobilization.
• Deposit strategy is relationship-driven, not rate-driven: The bank does not offer special schemes or higher rates beyond past practice. Deposit growth happens as part of the 360-degree customer relationship, with micro-market-level empowerment to assess local opportunities.
• New LCR guidelines will have a material but manageable impact: Per an analyst's math, the draft guidelines imply a 10-15 percentage point impact on LCR, which management called a fair estimate. The bank will assess final guidelines and adjust both asset and liability sides.
• The bank tapped infra and affordable housing bonds early in Q1: This was opportunistic, taken when market conditions were favorable.

Batra: "I think it's very difficult to assess the impacts right now and we will revisit our plans once the final guidelines come into place."

Non-Interest Income & Treasury

• Dividend income from subsidiaries drove the other income jump: ₹894 cr in dividends came from ICICI Securities, ICICI Lombard, and ICICI Prudential Life in Q1 FY25, versus ₹291 cr in Q1 FY24. Fee income grew 13.4% YoY to ₹5,490 cr, with ~78% from retail, rural, business banking, and SME customers.
• Treasury gains rose to ₹613 cr from ₹252 cr YoY: This reflected realized and mark-to-market gains in equities and security receipts. New investment guidelines now require MTM gains on FVTPL portfolios to flow through P&L, which was not recognized before.
• Subsidiary performance was broadly strong: ICICI Life APE grew 34.4% YoY, ICICI General GDPI grew 20.4% YoY with an improved combined ratio, ICICI AMC PAT grew 33.5% YoY, and ICICI Securities PAT nearly doubled. ICICI Bank UK PAT declined 18.1% in USD terms.

Guidance & Commitments

Key Metrics