ICICI Bank Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Margin compression continues, but pace slows: NIM fell to 4.25% from 4.27% QoQ, with management expecting broad stability until the rate cycle turns, after which floating loan repricing would create a lead-lag drag.
• Conscious unsecured slowdown is working through: Personal loan growth decelerated to 8.8% YoY from mid-30s a year ago, a deliberate risk call that has flattened the portfolio; management sees delinquencies stabilizing with improvement possible in a couple of quarters.
• Corporate book re-accelerates without diluting discipline: Domestic corporate growth picked up to 13.2% YoY from 11.8% in Q2, while the BB-and-below portfolio shrank further and management explicitly ruled out chasing finely priced, long-term exposures for volume.
• Asset quality stable, but retail additions bear watching: Net NPA held at 0.42%, though gross retail and rural additions rose to ₹5,304 crore partly on seasonal KCC patterns; the corporate stress pipeline remains benign.
• What to watch next quarter: Whether the seasonal KCC-driven NPA spike reverses, the trajectory of unsecured delinquencies after corrective actions, and any deposit cost relief if the rate cycle begins.

Margin & Liability Dynamics

• NIM trajectory: Domestic NIM fell to 4.32% from 4.34% QoQ and 4.52% YoY, driven by cost of deposits inching up to 4.91%. Management expects margins to be broadly stable until rate cuts begin, after which the lead-lag effect of floating loans repricing faster than fixed deposits would compress margins.
• Deposit growth softened sequentially as the bank calibrated to funding needs: system loan growth slowed, the CRR cut took effect mid-December, the RIDF portfolio was reduced, and cost-effective refinance borrowings were available. LCR remained strong at 123%.
• CASA outperformance reflects the bank's approach of deepening share of wallet with existing customers and acquiring new ones through digital platforms, not chasing any particular deposit type or changing product pricing. [38-39]
• Yield decline from Q2 to Q3 was largely a KCC accounting effect: a longer interest accrual period reversed in the quarter. Q4 has fewer days, so some unwinding of the day-count impact will be seen mathematically.

Banerjee: "I think we don't want to take very chunky, finely priced, long-term exposures just for the sake of loan growth. That's not our approach at all."

Asset Quality: Stability with Pockets of Watchfulness

• Net NPA ratio held steady at 0.42%, with gross NPA additions of ₹6,085 crore offset by recoveries of ₹3,392 crore, yielding net additions of ₹2,693 crore. The resolution book declined to ₹2,107 crore from ₹2,546 crore QoQ, with provisions of ₹691 crore held against these borrowers, above RBI requirements.
• Retail and rural gross NPA additions rose to ₹5,304 crore from ₹4,341 crore in Q2, partly reflecting the seasonal KCC pattern where higher additions typically occur in Q1 and Q3. KCC gross additions were ~₹714 crore in Q3 versus ₹721 crore in Q1 FY25.
• Corporate and business banking net NPA additions were a modest ₹175 crore versus ₹5 crore in Q2. The BB-and-below performing portfolio reduced further to ₹2,193 crore from ₹3,386 crore at September 30, 2024, a function of the book selected at the start of the year, not fresh downgrades.
• Unsecured retail delinquencies have risen over the last 6-7 quarters, but the trend has stabilized. Corrective actions including the deliberate personal loan slowdown are feeding through; management expects improvement "maybe a couple of quarters down the line." Secured retail slippages remain stable in absolute terms as the portfolio grows. [37-38]
• Credit cost remains within the previously discussed 50 bps range. Provisions declined this quarter due to continued portfolio quality improvement and recoveries from written-off accounts. Management sees provisioning costs potentially inching up but nothing that "worries us particularly or where we see any dramatic increase." [29-30]

Banerjee: "I think there also the trend has stabilized and hopefully as these actions feed through more maybe a couple of quarters down the line, we should start seeing some improvement."

Portfolio Choices: Where Growth Is and Isn't

• Corporate growth is not margin-dilutive: The bank serves ongoing relationships for periodic working capital and short-to-longer-term lending that meets P&L aspirations. The BBB-and-above portfolio increase of ~210 bps largely reflects upgrades from the BB book, which reduced ~60 bps; incremental BBB lending is possible but within limits. [32-34]
• Asset quality is not holding back growth: The corporate sector continues to perform well with some clawbacks of past provisioning. The bank sees many opportunities to drive risk-calibrated profitable growth across segments. [37-38]

Batra: "It has grown by about 8.8% year-on-year for this quarter. It was growing in the mid-30s about a year back. I think this has been a conscious decision."

Fee Income & Non-Core Revenue

• Fee income growth was broad-based across cards and payments, transaction banking, FX and derivatives, and lending-linked fees. Management does not target a proportion of total income but focuses on overall PPOP maximization. [36-37]
• Treasury gains declined to ₹371 crore from ₹681 crore QoQ as G-Sec yields rose. Year-on-year comparisons are not meaningful due to revised investment accounting guidelines from April 1, 2024, which make treasury subject to MTM and market-linked, hence inherently volatile. Future treasury performance is a function of market movement with no guidance given.
• Recoveries from the corporate book will slow down as most recoveries would have already occurred. Management does not give forward-looking guidance on recoveries.

Investments, Efficiency & Capital

• Operating expenses have been flattish for three quarters. Management sees opportunities for efficiencies by streamlining processes, integrating workflows, and removing redundancies, while continuing to invest in branches (129 added in Q3, 371 in the last 12 months), IT security, and reliability. There is no linear relationship between cost and top line.
• Employee costs declined due to variables like provisions for retirals. Headcount is a moving number; reductions in one quarter may be followed by hiring later. The bank no longer discloses headcount quarterly. [31-32][39-40]
• Technology investments continue in computing infrastructure and digital channel upgrades to strengthen system resilience and simplify processes. The iLens retail lending platform now integrates credit cards alongside mortgages, personal loans, and education loans. The DigiEase platform was launched to streamline Business Banking customer onboarding.
• Capital position is very comfortable: CET1 at 15.93%, total CAR at 16.6%. No plans to raise equity. The ₹13,100 crore contingency provision has been fixed since March 2023 with no further additions; corporate releases reflect portfolio quality improvement or recoveries, not recycling.[40-41]
• ECL implementation: RBI guidelines are yet to come. Given the robust provisioning levels already carried, management does not expect the impact to be very significant, but will take a view when draft guidelines are issued.

Banerjee: "I would think that our aim would be to continue to leverage the cost base better. And we don't think that there needs to be a sort of linear relationship with the top line."

Strategic Moves

• Merchant acquiring brought in-house: The bank sold its stake (less than 20%) in the JV with First Data and is now deploying its own POS machines with significantly higher investment in building its own stacks. Management believes 100% ownership enables better service and synergies, calling payments and merchant services a core part of the business.
• Branch network expansion reached 6,742 branches and 16,277 ATMs and cash recycling machines as of December 31, 2024, with 129 branches added in the quarter.
• Guiding principles unchanged: 'Return of Capital', 'Fair to Customer, Fair to Bank', and 'One Bank, One Team' continue to guide operations, with focus on maintaining high standards of governance, deepening coverage, and enhancing delivery capabilities for risk-calibrated profitable growth.

Batra: "We do believe with this, we will be able to do a much better service to all our customers. And payments and merchants service is the core part of our business and we would like to be invested 100% over here as opposed to 20% in the JV."

Guidance & Commitments

Key Metrics