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Our view – Slightly higher credit cost, slightly lower margin and growth should all be absorbed by markets in the long run

Asset Quality - Slippages were moderately higher on sequential basis mainly due to the seasonality of the KCC book: Gross NPA additions amounted to Rs 59.16bn for 1QFY25, translating to an annualized slippage ratio of 1.9% for the quarter. Gross NPA additions had amounted to Rs 51.39bn during 4QFY24. Retail, rural and business banking contributed Rs 57.32bn to slippages, which includes additions of Rs 7.21 bn from the KCC portfolio, which are seasonally elevated in the odd quarters. Provisions were Rs 13.32bn, up by 85.4% QoQ and 3.1% YoY, translating to annualised credit cost of 43bps. The pace of recoveries will slow and hence, credit cost will normalize upward gradually from the current level of 50 bps of normalised credit cost.

Net Interest Margin - NIM saw a marginal contraction sequentially due to pressure on yield on advances: NIM was 4.36%, down -3 bps QoQ and -50bps YoY. The cost of deposits has risen 2 bps QoQ to 4.84% whereas the yield on advances has declined 8 bps QoQ to 9.80%. The yield on advances has been under some pressure due to competitive intensity, particularly in corporate business and mortgages.

Balance sheet growth – Total advances have grown 15.7% YoY with non-corporate segments driving growth: Retail loans have grown 17.1% YoY and 2.4% QoQ. Business banking book has grown 35.6% YoY and 8.9% QoQ. SME portfolio has grown 23.5% YoY and 4.0% QoQ. The bank has traditionally operated loan to deposit ratio at low to mid80s and does not see this changing materially

We maintain ‘Buy’ rating on ICICI with a revised price target of Rs 1475: We value the standalone bank at 2.7x FY26 P/BV for an FY25E/26E RoE profile of 17.4%/16.5%. We assign a value of Rs 231 per share to the subsidiaries, on SOTP.

Result Highlights (See “Our View” above for elaboration and insight)

* Opex control: Total cost to income ratio at 39.7% was up/down by 44/-59bps QoQ/YoY and the Cost to assets was at 2.2% up/down by 11/-12bps QoQ/YoY.

* Fee income: Core fee income to average assets was at 1.2%, down -2/-3bps QoQ/YoY.

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