ICICI Bank has reported a solid performance in its Q1 FY25 results, demonstrating healthy credit growth and stable asset quality. Analysts predict that the bank will continue to sustain its growth trajectory, although challenges such as narrowing net interest margins (NIMs) and rising operating expenses are anticipated to exert some pressure.
“We factor in strong business growth and expect the pace of earnings growth to remain healthy. We factor in Advances/NII/Earnings growth of 16/13/13% CAGR over FY25-27E. However, considering the pressure on NIMs and normalising credit costs, we trim our NII/Earnings estimates by ~1-2%/2- 3% respectively over FY25-26E,” Axis Securities said in a report.
The bank’s net interest income (NII) grew by 7% year-on-year and 2% quarter-on-quarter, aligning with expectations. Despite a slight decline in NIMs by approximately 4 basis points quarter-on-quarter to 4.36%, other income exhibited strong growth. Non-interest income surged by 29% year-on-year and 24% quarter-on-quarter, driven by healthy fee income and a significant treasury gain.
ICICI Bank’s credit growth remained robust at 15.7% year-on-year and 3.3% quarter-on-quarter, led by substantial advances in the SME and business banking segments, which grew by 23.5% and 36% year-on-year, respectively. Retail loans also showed a healthy increase, growing by 17% year-on-year. However, deposit growth was relatively slower at 15.1% year-on-year and 0.9% quarter-on-quarter.
Stable asset quality
Asset quality remained stable with the gross non-performing assets (GNPA) ratio steady at 2.15% quarter-on-quarter. Slippages were slightly higher due to seasonal factors, but the bank’s provision coverage ratio (PCR) remained robust at around 80%.
“A stable mix of a high-yielding portfolio (Retail/Business Banking) and ongoing growth in Business Banking, SME, and secured retail segments are driving broad-based growth, helping the bank maintain healthy business diversification. Asset quality has remained stable, with no signs of stress, leading to stable GNPA/NNPA ratios. The additional contingency provisioning buffer of INR131b (1.1% of loans) provides
further comfort in case of any future cyclical stress,” Motilal Oswal Financial Services said.
ICICI Bank’s strategic investments in technology and its diversified portfolio are expected to provide some cushion against rising operating expenses, it said.
In addition, the bank’s significant contingency provisioning buffer offers comfort against potential future cyclical stress. The bank has managed to sustain a strong return on assets (RoA) and return on equity (RoE), projected at 2.19% and 17.3%, respectively, by FY26.
