ICICI Bank Limited (IBN) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary reveals a stable financial performance with range-bound margins and improving asset quality. However, the lack of specific guidance and vague management responses in the Q&A session, particularly regarding CEO tenure and NIM projections, introduces uncertainty. No significant positive catalysts like partnerships or strong guidance were mentioned, and the absence of market cap data limits insight into potential stock reactions. Thus, the prediction remains neutral.
Key Financial Performance
Profit Before Tax (excluding treasury) INR 161.64 billion, grew by 9.1% year-on-year. The growth is attributed to the bank's 360-degree customer-centric approach and operational resilience.
Core Operating Profit INR 170.78 billion, increased by 6.5% year-on-year. The increase reflects the bank's focus on simplicity and operational resilience.
Profit After Tax INR 123.59 billion, grew by 5.2% year-on-year. The growth is due to improved operational performance and risk-calibrated profitable growth.
Average Deposits Grew by 9.1% year-on-year and 1.6% sequentially. Growth driven by increased customer deposits and savings.
Domestic Loan Portfolio Grew by 10.6% year-on-year and 3.3% sequentially. Growth attributed to increased retail and business banking loans.
Retail Loan Portfolio Grew by 6.6% year-on-year and 2.6% sequentially. Growth driven by higher demand for retail credit.
Rural Portfolio Declined by 1% year-on-year but grew by 0.8% sequentially. Decline attributed to lower rural credit demand.
Business Banking Portfolio Grew by 24.8% year-on-year and 6.5% sequentially. Growth driven by increased business activities.
Net NPA Ratio 0.39% at September 30, 2025, compared to 0.41% at June 30, 2025, and 0.42% at September 30, 2024. Improvement due to better credit quality and recoveries.
Net Interest Income INR 215.29 billion, increased by 7.4% year-on-year. Growth due to reduction in deposit rates and cost of borrowings.
Non-Interest Income (excluding treasury) INR 73.56 billion, grew by 13.2% year-on-year. Growth driven by higher fee income and dividend income from subsidiaries.
Operating Expenses Increased by 12.4% year-on-year. Increase reflects retail business-related expenses and festive season-related marketing spends.
Provisions INR 9.14 billion, declined sequentially. Decline reflects the impact of KCC seasonality and healthy asset quality.
Capital Adequacy Ratio 17% at September 30, 2025, including profits for H1 2026. Indicates strong capital position.
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Operating Highlights
Domestic loan portfolio growth: Grew by 10.6% year-on-year and 3.3% quarter-on-quarter as of September 30, 2025.
Retail loan portfolio: Grew by 6.6% year-on-year and 2.6% sequentially, constituting 42.9% of the total portfolio.
Business banking portfolio: Grew by 24.8% year-on-year and 6.5% sequentially.
Overseas loan portfolio: Constituted 2.3% of the overall loan book as of September 30, 2025.
Profit before tax (excluding treasury): Increased by 9.1% year-on-year to INR 161.64 billion.
Core operating profit: Increased by 6.5% year-on-year to INR 170.78 billion.
Net NPA ratio: Improved to 0.39% as of September 30, 2025, compared to 0.41% in the previous quarter.
Provisions: Total provisions during the quarter were INR 9.14 billion, reflecting a decline from the previous quarter.
Net interest income: Increased by 7.4% year-on-year to INR 215.29 billion.
Focus on risk-calibrated growth: The bank aims to grow market share across key segments while maintaining a strong balance sheet and prudent provisioning.
Branch expansion: Added 263 branches in H1 FY 2026, bringing the total to 7,246 branches as of September 30, 2025.
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Risk or Challenges
Rural Portfolio Decline: The rural portfolio declined by 1% year-on-year, indicating potential challenges in rural lending or demand.
Net NPA Additions: Net additions to gross NPAs were INR 13.86 billion during the quarter, reflecting ongoing credit quality issues.
Gross NPA Additions in Retail and Rural Portfolios: Gross NPA additions from retail and rural portfolios were INR 40.49 billion, indicating higher stress in these segments.
Loans to NBFCs and HFCs: The total outstanding loans to NBFCs and HFCs declined, which could indicate reduced exposure or challenges in these sectors.
Builder Loan Portfolio Risk: 1.3% of the builder portfolio was rated BB and below or classified as nonperforming, highlighting risks in the real estate sector.
Increase in Loans Rated BB and Below: Loans and nonfund-based outstanding to performing corporate borrowers rated BB and below increased to INR 36.61 billion, indicating rising risk in lower-rated corporate exposures.
Decline in Treasury Income: Treasury income declined significantly to INR 2.20 billion from INR 12.41 billion in the previous quarter, reflecting challenges in fixed income securities.
Higher Operating Expenses: Operating expenses increased by 12.4% year-on-year, driven by retail business-related expenses and festive season marketing, which could pressure margins.
Combined Ratio of ICICI General: The combined ratio of ICICI General stood at 105.1%, indicating underwriting losses and potential inefficiencies.
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Guidance & Outlook
Future Portfolio Growth: The bank anticipates opportunities to drive risk-calibrated portfolio growth and increase market share across key segments.
Balance Sheet and Capital Management: Focus remains on maintaining a strong balance sheet, prudent provisioning, and healthy capital levels to deliver sustainable and predictable returns to shareholders.
Loan Growth Projections: The mortgage portfolio is expected to grow steadily, with a 9.9% year-on-year increase already observed. Auto loans and commercial vehicles portfolios are expected to remain stable or grow modestly.
Credit Card Portfolio: The credit card portfolio is projected to continue its growth trajectory, with an 8.4% sequential increase already recorded.
Asset Quality: The bank aims to maintain healthy asset quality across segments, with a focus on reducing gross NPA additions and improving recoveries.
Technology and Operational Efficiency: Technology expenses are expected to remain around 11% of operating expenses, reflecting ongoing investments in digital and operational efficiency.
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Shareholder Return Plan
Dividend income from subsidiaries: Dividend income from subsidiaries was INR 8.1 billion in this quarter compared to INR 13.36 billion in the previous quarter and INR 5.41 billion in Q2 of last year. The timing of receipt of final dividend depends on the annual general meetings of the respective subsidiaries, which are generally held in the first quarter of a fiscal year. The year-on-year increase in dividend income was primarily due to the receipt of interim dividend from ICICI Securities and ICICI Venture.
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Key Q&A
Q:Do you already see green shoots on growth? Do you see growth accelerating after so many measures taken by the government? And will we reach close to mid-teens by the end of the year?
A:Growth has picked up, particularly in the retail portfolio and business banking. However, no specific year-end loan growth number was provided. The focus remains on market opportunities and investments in distribution.
Q:Would you see corporate picking up? Any comments on the corporate loan growth environment?
A:Corporate India is well-funded with strong balance sheets and access to various funding sources. The bank is active in the corporate space, but this may reflect more in transaction banking income rather than loan growth.
Q:Margins have held up pretty well compared to expectations. Is this the bottom, and from here on, do they stay stable without rate cuts or can they improve?
A:Margins have performed better than expected and are expected to remain range-bound without major movements either way.
Q:Would there still be deposit repricing left?
A:Deposit repricing will occur quarter-to-quarter. Factors like CRR reduction, KCC quarter, and competitive dynamics will influence margins, which are expected to remain range-bound over the next couple of quarters.
Q:Your CASA market share has been improving. Could you talk about the visibility of continued market share gains on CASA?
A:CASA growth has been driven by distribution expansion, digital platforms, and focus on specific segments like business banking. Future growth is expected from transaction banking, corporate relationships, and synergies with ICICI Direct.
Q:How do we think about the payout ratios with such a solid stock and flow of CET1?
A:The CET1 ratio, including profit, is at 16.35%. There are no specific plans for payouts, as the focus is on maintaining a strong balance sheet and leveraging capital for growth.
Q:Are you in a position to give any color on your intention to continue for another term?
A:The CEO's term has a year remaining, and the Board will decide and disclose at the appropriate time.
Q:Is there a trade-off between growth and profitability? Could you accept lower ROAs for higher growth?
A:The focus is on risk-adjusted PPOP rather than a trade-off between growth and profitability. ROA is seen as an outcome of sustainable business practices.
Q:Should we expect any uptick in vehicle loans with GST cuts? How about personal loans and mortgages?
A:Loan growth has picked up, and there is optimism for growth in these segments. Personal loans are seeing increased disbursements after corrective actions, while mortgage growth remains competitive but less PPOP-accretive.
Q:How should we see the LDR ratio settling, and will term deposits grow to match loan growth?
A:LDR ratios are influenced by liquidity and CRR cuts. The bank is comfortable with current levels and has the ability to grow retail deposits further.
Q:What is the impact of RBI directions on ECL and risk weight benefits?
A:The guidelines are open for comments, but net impact is expected to be positive. The bank's provisioning levels are sufficient to handle transitions without significant impact.
Q:Should one expect a sequential decline in OpEx in the third quarter due to festival-related expenses in Q2?
A:There may be a decline in specific line items, but overall OpEx is expected to remain focused on business growth without significant sequential increases.
Q:Has retail asset quality started to improve rather than just stabilize?
A:Retail slippages have declined year-on-year and sequentially, indicating improvement in asset quality, particularly in unsecured segments like personal loans and cards.
Q:How do you track the end use of crop loans, and has there been any discussion with the regulator?
A:Processes for PSL classification are in place and reviewed, but there is nothing specific to call out at this time.
Q:Why do you say NIMs will be range-bound for the next 2 quarters?
A:NIMs are influenced by multiple factors like monetary policy, competitive dynamics, and loan mix. The bank has not taken a view beyond the next couple of quarters.
Q:How much of your term deposit book was acquired in the last 6 months?
A:The bank does not provide specific data on term deposit acquisition timelines.
Q:What caused the provision for retiral benefits, and how should it be modeled going forward?
A:The provision was influenced by gratuity-related adjustments and DMF allowance. Future modeling should consider these factors but not expect significant sequential increases in OpEx.
Q:Are slippages improving across all retail segments or just in PLCC?
A:Slippages have improved across most retail segments, not just in PLCC.
Q:How do you view the capital adequacy and potential for increased payouts given high CET1 ratios?
A:Capital adequacy is strong, and growth is not constrained. Payout decisions will depend on future balance sheet positions and growth opportunities.
Q:What is the impact of ECL on CET1 ratios?
A:The bank does not expect a significant impact from ECL transitions, and it could potentially be CET1-accretive depending on final guidelines.
Q:How much of your salaried accounts come from the IT services sector, and is there any impact from AI-related unemployment?
A:The IT services sector accounts for a significant share of salaried accounts, but no impact from AI-related unemployment has been observed so far.
Q:Review of Unclear Management Responses
A:Management avoided providing specific year-end loan growth numbers, details on term deposit acquisition timelines, and exact impacts of ECL on CET1 ratios. Responses to questions about the CEO's future term and NIM projections beyond two quarters were also vague.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Director evening
Mr Managing
nonfund portfolio
portfolio market
portfolio nonfund
result today
risk portfolio
sir MD
today Rakesh
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