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Yet another strong performance

ICICI Bank (ICICIBC IN) delivered yet another strong quarter, demonstrating earnings resilience, with Q4FY26 PAT at INR 137bn (up 8.5% YoY/21% QoQ). The quarter was marked by better-than-expected growth momentum (advances up ~6% QoQ), better margins (NIM at 4.32%), and improved asset quality (slippages at 1.2% vs 1.5% QoQ), reinforcing the bank’s earnings resilience. Deposit growth surprised positively, rising 11.4% YoY/8.1% QoQ, with better CASA trends. We believe ICICI Bank continues to demonstrate strong execution across cycles, with levers in place to sustain superior risk-adjusted returns, supported by healthy growth across segments and controlled asset quality. The bank’s consistent delivery on key operating metrics positions it well to maintain earnings momentum, even on a high base. Amid ongoing geopolitical uncertainties, the stock has seen certain pressure points, but we remain confident on strong underlying and continue to maintain it as our top pick within larger peers. With a robust subsidiary franchise supporting valuation and strong underlying fundamentals, we expect ICICI Bank to sustain its premium positioning within the sector. We retain Buy, with a SOTP-based TP of INR 1,783 (unchanged).

Better growth outlook; steady NIM: Key highlight in Q4 was better-than-expected growth momentum, up 6% QoQ, with the bank sounding confident of sustaining current traction. NIM improved ~2bps QoQ to 4.32%, driving ~5% QoQ NII growth. However, NIM included a ~5bps benefit from interest on IT refunds (vs ~1bp in Q3FY26). Adjusting for this, margins were marginally lower. The bank expects NIM stability, supported by liability repricing (assuming no further rate cuts). The bank is balancing profitability and growth, which may lead to near-term challenges. Notwithstanding global uncertainties, we believe ICICIBC has the levers to sustain overall earnings delivery, with ROA of >2% and ROE of +15%, and thus, a prominent play for earnings resilience.

Asset quality – Improving trends: Slippages improved to INR 42.4bn (INR 53bn QoQ), led by a decline in retail and rural segments, while corporate and BBG remained broadly stable QoQ. Retail and rural slippage (adjusted for KCC portfolio in Q3) improved to INR 31.4bn versus INR 35.4bn QoQ, with management confident of sustaining near-term trends. Credit cost for the quarter remained low, supported by corporate write-backs (the bank nets this off from provisions). Strong buffers, including PCR >75%, NNPA at ~33bps, and contingent provisions at ~0.85% of loans, provide comfort on earnings stability. Consistent performance and improved underwriting should further strengthen investor confidence, positioning the bank as a sector leader in the current cycle.

Retain Buy with an unchanged TP of INR 1,783: While turning rate tables have had transitory revenue challenges for the 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. Factoring better core and lower credit costs we raise our FY27/FY28 EPS by 3-5% and introduce FY29 estimates. We retain Buy with SoTP TP of INR 1,783, assuming the core bank at 2.3x Mar ’2028E P/BV and adjusting for subsidiary value. The challenge hereon will be the valuation premium to HDFC Bank (currently >20%), which may limit the near term re-rating for ICICI Bank.

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