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ICICIBC saw a stellar quarter with 3.7% beat on core PPoP (HDFCB:in-line, AXSB:miss) due to better NII/fees as loan growth (ex-FCNR) was strong at 7.3% QoQ (AXSB-5.3%, HDFCB-3.4%). Post 10bps QoQ decline in NIM to 4.28%, it may further fall in Q3FY27 due to full FCNR impact. NIM may improve from Q4FY27 led by repo hike and liquidity utilization. Despite being NIM dilutive, ICICIBC garnered sizable FCNR money, gaining a strategic advantage, as substantial fixed-rate funding was mobilized to support future growth amid a rate hike cycle. Due to better loan growth, we raise core PAT for FY27/28E by avg. 5%. We tweak multiple to 2.6 from 2.7x but raise TP to INR 1,900 from INR1,850 as we roll forward to Sep’28 core ABV. Reiterate ‘BUY’.

Strong quarter with beat on all fronts: NII was 1.3% higher at INR253.4bn due to better loan growth as NIM (calc.) at 4.33% was in-line; reported NIM (adj.) was down 10bps QoQ to 4.28% due to FCNR. Loan growth was higher at 30% YoY (PLe 26.2%). Deposit accretion was largely in-line at 27.1% YoY (PLe 26.7%). LDR was flattish QoQ at 89.4%. Other income was lower at INR80.5bn (PLe INR90bn) due to treasury loss of INR2.3bn; fee was ~4% higher at INR78bn. Opex at INR128bn was in-line. Core PPoP at INR203bn was a 3.7% beat; PPoP was INR205.8bn. GNPA was lower at 1.20% (PLe 1.28%) as gross slippage was INR48.3bn (PLe INR53.9bn) with better recovery at INR36.2bn. Provisions were lesser at INR8.5bn (PLe INR18.3bn). Core PAT was 9.9% above PLe at INR146.5bn.

Loan growth was driven by corporate/SME: Loan growth was strong at 12.3% QoQ mainly driven by BuB (11.1%), corporate (10.4%) while retail & rural growth was softer at 3.2%. Healthy corporate growth was a function of (1) WC requirements, (2) shift from bond/offshore markets and (3) investment activities across corporates. BuB accretion was partly aided by ECLGS, while growth in NTB customer acquisition and existing book continues. Shift from product-centric to customer-centric approach supported by festive season spends is expected to drive CC growth. FCNR(B) deposit accretion was highest at INR1.7trn with leveraged portion at INR856bn.

NIM dilution to persist in Q3FY27; outlook remains sanguine: Reported NIM declined by 10bps QoQ to 4.28% due to FCNR, with further moderation expected in Q3FY27 due to full impact of FCNR and seasonal agri slippage. Management remains sanguine on NIM outlook post Q3FY27 given substantial fixed-rate funding (FCNR) mobilized to support future growth amid further repo rates hikes, which may cushion margins.

Q2FY27 Concall Highlights

Balance sheet

• Advances grew by 12.3% QoQ led by BuB, corporate and FCNR loans. Strong franchise, access to growth opportunities, favourable rate cycle and pricing has helped ICICIBC to pursue higher growth, with excess liquidity to be deployed over next 2 quarters where credit growth is seasonally strong.

• Corporate grew by 10.4% QoQ to INR3.5trn led by (1) working capital requirements (2) shift from bond market (3) shift from offshore to onshore rupee market and (3) investment activities across corporates. YoY growth (30.6%) was higher due to low base effect. NBFC & HFC constituted 4.3% of advances as of Sep’26.

• While the corporate book may yield lower returns than retail basis RAROC, it benefits from structurally lower credit costs and ancillary revenue streams from transaction banking, payments and collections. Corporate franchise expansion has also contributed to strong CA growth of 7% QoQ.

• BuB witnessed healthy growth of 11.1% QoQ, partly driven by ECLGS drawdowns. Underlying growth continues in new customer acquisitions and enhancement to existing customers led by business expansion.

• Management indicated that retail & rural banking started witnessing mid-teens YoY growth (14.8% in Q2FY27) from earlier single digit growth led in mortgages (15.3%) and personal loans (16.6%).

• ICICIBC is shifting from a product-centric to a customer-centric approach in CC, launching targeted variants to strengthen customer engagement. CC business saw 9.7% YoY degrowth due to timing of festive season while spends are expected to increase in Q3FY27.

• Sequential growth in gold loans moderated due to realignment of processes, distribution and operational risk controls. Management expects volumes to recover as these measures are implemented.

\• The bank mobilised USD 18bn of FCNR(B) deposits, out of which, ~USD 9bn were leveraged on its own book while ~USD 3.6bn lent by partner banks. Management indicated that FCNR mobilization strengthened the NRI franchise and offered cost-effective funding.

• SA growth was muted QoQ due to trend of decline in institutional savings, particularly in govt departments, while retail savings growth remains healthy.

• 57%/14% of the loan book is linked to external benchmark/MCLR. Average LCR for Q2FY27 stood at 126%.

• During Q2FY27, the Bank acquired additional 2% stake in ICICI life insurance Ltd. for INR14.7bn.

Profit & loss

• Overall NIM declined by 10bps QoQ to 4.18% led by (1) FCNR leveraged through overseas branches yielding ~1% vs ~4% domestic margins (2) lower proportion of CASA deposits leading to increase in blended CoF by 8bps QoQ. Overseas NIM has increased by 6bps QoQ supported by rising interest rates in dollar markets, which enabled the bank to earn higher spreads on floating-rate deposits.

• Management expects margins to moderate further in Q3FY27 as full impact of FCNR mobilization gets reflected with seasonal agri slippage aiding further dilution. This would be partly offset by impact of rate hike in floating book. NIM is expected to improve from Q4FY27 as impact of these factors reverses out.

• Management indicated that near-term NIM compression is acceptable, given the substantial fixed-rate funding mobilised to support future growth amid further repo rates hikes.

• Fee income grew 7% QoQ to INR78bn which included processing fees from FCNR(B) lending, broadly offset by the associated funding costs reflected in higher operating expenses.

• Dividend income declined due to shift in timing of dividend declaration from quarterly to semi-annually by ICICIAMC. Treasury loss of INR2.3bn during Q2FY27 was on account of adverse market movement.

• Other opex increased by 4.1% QoQ led by branch expansion. Tech spends were ~11% of expenses.

Asset quality

• Recoveries at INR36bn were higher QoQ led by one-off chunky recovery in corporate segment. Slippages in corporate/BuB continue to remain minimal, while slippages in retail have come down due to lower delinquencies in PL and CC segment.

• ICICIBC had higher standard asset provisions during the quarter due to FCNR led expansion of loan book. Adjusting for one-off corporate recovery, standard asset provision and seasonality of KCC provisioning, the normalized credit cost remains around 50bps.

• Bank continues to hold floating provisions of INR131bn and INR12.8bn against agri PSL provision with clarification expected in next 1-2 quarters.

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