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Steady core, play for earnings resilience

ICICI Bank (ICICIBC IN) delivered yet another steady core performance amid challenges,
demonstrating earning s resilience. While core PPoP (ex -treasury) was ahead of estimates,
lower treasury (loss) and higher credit cost (one -off item) fed into lower Q3 PAT at INR 113bn.
The key highlight was better -than -expected growth momentum, controlled slippage s, and
stability across key metrics. However, uncharacteristically, the bank was asked to make
standard provision s of INR 12.8bn by the RBI (one -time) , which hurt profitability. We believe
the bank has strong underlying and ha s levers to continue delivering better risk -adjusted
return, even on high base, and thus the risk of an earnings disappointment is rather low. We
believe the bank has all it takes to be an industry benchmark this cycle , thereby sustaining
and improving valuation premium. Moreover, the Board has approved the extension of MD &
CEO Sandeep Bakhshi by two years, which removes a major overhang . We retain Buy with a
higher SOTP -based TP of INR 1,783 as we roll forward to December 2027 E and adjust for
subsidiary valuation .

Better growth outlook; steady NIM: Key highlight of the quarter was better -than -expected
growth momentum , up 4% QoQ , with the bank sounding confident of sus taining current
traction. However, NIM w as below expectations , flat QoQ , restricting NII growth to 2% QoQ.
The bank is confident of better NIM as liability repricing w ould cushion any yield impact
(sans any further rate cuts). It is making choices to balance profitability and growth ; thus ,
there could be transitionary dislocation . Transition from high -teen core PPoP growth to low -
teen growth may render narrative dislocation, but it will be adjusted , as we believe ICICIBC
has the levers to sustain overall earnings delivery with a ROA of >2% and a ROE of 15% plus

Asset quality as we had expected; higher credit cost on RBI directive negative surprise:
Slippages were at INR 53.6bn (INR 50.3bn QoQ), with a seasonal rise in agri slippages while
having steady performance in other segments. Retail slippages were controlled, with ICICIBC
confident of near -term trends. However, bank was asked to make standard asset provision s
of INR 12.8bn, similar in nature to what we saw in a few larger banks) , which hurt credit cost .
Coverage of >75%, NNPL of 37bp, contingent buffer at ~0.9% of loans imply the bank has
buffers to ensure earnings consistency, missing among peers. We believe consistent
performance will build investor confidence of changed underwriting earmarking as the
sector leader this cycle.

Retain Buy with a higher TP of INR 1,783: While turning rate tables ha s had transitory
revenue challenges for banks, ICICIBC has held the tide and offered a clean play on best -in -
class ROA. It should trade at a premium on high quality earnings. We retain Buy with a higher
TP of INR 1,787 from INR 1, 707 based on a SOTP -based valuation, assuming the core bank at
2.5x (unchanged) December 2027E P/BV) and adjusting for subsidiary value , as we roll
forward .

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