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Single digit top-line growth: ICICI Bank reported net interest income growth of 2.4% QoQ/7.3% YoY to Rs 195.5bn in Q1FY25 as the bank saw moderation in its margins with steady growth in assets. Owing to single digit top-line growth, its pre-provision operating profit grew by 0.6% QoQ/11% YoY to Rs 154.1bn. The bank saw increase in provision and contingencies by 85.4% QoQ/3.1% YoY as the bank credit cost start to normalize. Due to such increase in provisions, PAT was reported at 3.3% QoQ/14.6% YoY to Rs 110.6bn.

All segments contributed to advances growth: During the quarter, the bank’s loan book increased by 3.3% QoQ/15.7% YoY to Rs 12,232bn. The growth across all segments contributed to this advances growth. Retail/Business Banking/SME were the key segment which reported a growth of 17%/36%/24% YoY. The bank continues to grow at healthy pace and the bank expects the growth momentum to continue in coming quarter as well which will be driven by the all segment. The corporate segment which was lagging is also picking up pace as private capital expenditure is also gaining momentum.

Term led deposits growth: Deposits during the quarter increased by 0.9% QoQ/15.1% YoY to Rs 14,262bn. The bank’s deposit mobilization is growing at a healthy pace as compared to its peers. The growth in deposits was mainly led by the term deposits which increased by 3.1% QoQ/20% YoY while CASA deposits saw decline on sequential basis by 2% QoQ while increasing 8.6% YoY. CASA deposits saw moderation on the quarterly basis mainly due to decline in the current deposits by 9% QoQ while on increasing 9% YoY. CASA ratio during the quarter was 40.9% which declined on YoY basis by 236bps and 125bps on QoQ basis. Going forward, the management expects deposits mobilization to continue at a healthy pace as the bank is strategically well placed to gather deposits with growing branch count and its online presence.

Marginal dip in margins: The bank experienced a decline in its margins as the net interest margin dropped by 4bps QoQ and 42bps YoY to 4.34%. This decline was primarily due to a moderation in interest-earning assets by 5bps QoQ /YoY, while the cost of funds remained flat for the quarter at 5.05%. The bank managed to sustain margins through a healthy asset and liability mix and expects to maintain this in a healthy range going forward.

Valuation and outlook: ICICI Bank experienced single-digit top-line growth during the quarter, driven by steady growth in advances and stabilization in the cost of funds. However, its advances and deposits are growing at a steady pace and in a sustained manner which is aiding the bank to grow its business with robust asset quality. The bank is expected to improve on its margins and generate healthy returns. Financially, we expect NII/PPOP/PAT to grow at 11%/7%/8% CAGR over FY24-26E. We maintain Buy rating on ICICI Bank and increase our target price of Rs 1,396 valuing the bank at 2.5x of its FY26E Adj. BV.

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