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Focus remains on profitability compared to peers

Quick Pointers:

? Reported NIM was better; beat on core PAT due to lower provisions.

? Loan growth and NIM movement QoQ was better to peers.

ICICIB saw a good quarter due to better NIM and lower provisions that led to core PAT beat of 4.2%. Adjusted for IT refund of 7bps in Q1FY26, reported NIM movement for Q2FY26 was superior to peers since it was up 3bps QoQ to 4.3%. HDFCB/AXSB saw a decline of 8/7bps QoQ. While bank expects NIM to remain stable in H2FY27, we expect it to improve owing to deposit repricing and CRR reduction. Quality of loan growth QoQ was also better as it was retail/SME led, while HDFCB/AXSB saw strong corporate growth. Loan accretion improved to 3.2% QoQ (1.7% in Q1’26) mainly led by BuB/retail while within retail, unsecured growth picked up to 3.6% QoQ. Bank expects healthy growth in retail/SME to sustain and has a positive outlook on overall loan growth. With industry best expected core RoA of 2.1% for FY27E, we maintain multiple at 2.9x but increase TP to Rs1,800 from Rs1,730 as we roll forward to Sep’27 core ABV. Retain ‘BUY’.

? Decent quarter; with better NIM and lower provisions: NII was largely in-line at Rs215.3bn as NIM (calc.) was a tad higher 4.37% (PLe 4.33%); reported NIM fell by 4bps QoQ to 4.3%. Loan growth was 10.3% YoY (PLe 10%) while deposit accretion was lower at 7.7% YoY (PLe 9.1%). CASA was stable QoQ at ~41%. LDR rose to 87.3% (84.8% in Q1’26). Other inc./fees at Rs75.8bn and Rs64.9bn met estimates. Opex at Rs118.1bn was 2.2% above PLe led by higher other opex; staff cost was lower. Core PPoP at Rs162.1bn was 1.1% below PLe; PPoP was Rs173bn. Asset quality improved; GNPA at 1.58% (PLe 1.66%), provisions at Rs9.1bn (PLe Rs16.3bn) were better due to lesser net slippages. Gross slippage was lower at Rs50.3bn (PLe Rs55.3bn); recoveries were more at Rs36.5bn (PLe Rs32.1bn). Buffer provisions at 93bps of net loans were intact. Core PAT was 4.2% above PLe at Rs115.4bn; PAT was Rs123.6bn.

? Sequential loan growth increases: Credit accretion picked-up to 3.2% QoQ (1.7% in Q1’26) that was mainly led by BuB/retail which grew by 6.5% and 2.6%. Within retail, growth was driven by mortgages (+2.8%) and PL/CC which saw a combined growth of 3.6%. BuB growth momentum continues due, to a combination of better distribution process, technology and digital interface offered to customers while keeping asset quality intact. Management expects healthy growth trends in retail/SME to sustain and has a positive outlook on overall loan growth. We are factoring a loan CAGR of 13.5% FY25-27E while the bank may deliver higher growth. LDR has expanded across the system and bank expects it to further increase once CRR reduction takes effect.

? NIM may further improve; opex growth to remain soft: While bank expects NIM to be rangebound, we expect NIM to improve in H2FY26 due to remaining deposit repricing and full CRR reduction. Staff cost fell by 8.5% QoQ due to lower provision requirement for retirement benefits. Other opex was up 12.3% QoQ driven by retail linked expenses and festive season related marketing spends. ICICIB does not expect opex to rise materially in upcoming quarters

Q2FY26 Concall Highlights

Balance Sheet

? Growth has picked up QoQ especially in retail and while BuB continues to grow well. Management expects these trends to sustain and has a positive outlook on overall loan growth.

? LDR has expanded across system and management expects it to further go up once CRR reduction takes effect. Management is comfortable with current levels of LDR.

? Management stated that the RBI draft circular on risk weights would be net positive for the bank.

? Bank believes that the impact from ECL would be manageable given the level of provisioning held by the bank.

? Loans by benchmark: EBLR 55%, MCLR 14% and Fixed 31%.

Profit & Loss

? Bank expects NIM to be rangebound hereon due to mix of impact from i) remaining deposit repricing ii) full CRR reduction iii) KCC seasonality.

? Fees from retail, rural and business banking customers constituted about 78% of the total fees.

? Treasury income was lower in the quarter due to increase in yield on fixed income securities.

? Staff cost fell by 8.5% QoQ due to lower provisioning requirement for retirement benefits.

? Sequential increase in other opex of 12.3% was driven by retail business linked expenses and festive season related marketing spends.

? Bank does not expect a material increase in opex in the upcoming quarters.

? Tech expenses formed 11% of opex for H1FY26

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