This is a Mint Premium article gifted to you.Subscribe to enjoy similar stories.
ICICI Bank reported strong loan growth and sharply lower provisions in the March quarter (Q4FY26), just what it needed in a period when operating costs rose faster than income. Loans expanded at their fastest pace in two years, up 15.8% year-on-year to ₹15.5 trillion. Traction in home loans, rural lending and business banking offset continued moderation in the credit-card portfolio. Deposits were also healthy at about ₹18 trillion, rising 11% year-on-year.
Profitability was boosted by a steep 90% year-on-year fall in provisions, aided by lower retail slippages and recoveries from written-off corporate loans. The gross annualized slippage ratio fell to 1.11%, down 36 basis points (bps) sequentially and 41 bps year-on-year, Systematix Shares and Stocks said. A lower ratio signals better asset quality.
Further, gross non-performing assets (NPAs) declined 27 bps year-on-year to 1.40%, while net NPAs fell 6 bps to 0.33%. Credit cost dropped to just 3 bps, among the lowest in recent years, pushing quarterly profit ahead of expectations. However, ICICI Bank’s FY27/28 earnings remain sensitive to credit costs; every 5 bps increase could cut earnings by 1.2%, Nuvama Research said.
The quarter also had weak spots. Operating expenses (opex) rose 12% year-on-year due to higher provisions for retiral benefits and continued investments in technology and branch expansion. This outpaced 8% net income growth, limiting pre-provision operating profit growth to just 3% and missing expectations.
Looking ahead, management expects opex growth to stay below revenue growth going forward. A shift in the credit-card portfolio towards transactors from revolvers also weighed on income. Transactors pay their outstanding in full, while revolvers carry forward a balance and pay interest on the outstanding. Overall, subdued fee income pulled back total net income growth to 6%. ICICI also reported over ₹100 crore in treasury losses, partly due to the Reserve Bank of India’s mandate to unwind net open forex positions.
Net interest margin (NIM) at 4.32% was steady sequentially but declined 9 bps year-on-year due to interest rate transmission dynamics. With nearly 56% of loans linked to external benchmarks such as the repo rate, lending yields adjust quickly after policy easing, while deposits reprice with a lag. This creates near-term margin pressure before lower rates begin to support credit growth. However, management expects deposit repricing benefits to continue, keeping margins broadly range-bound.
Meanwhile, loan-to-deposit ratio (LDR) rose to 86.6% as credit growth outpaced deposit mobilization in Q4FY26. Elevated LDR sometimes raise concerns about funding constraints, but management indicated that deposit growth is unlikely to become a bottleneck for advances growth.
Encouragingly, ICICI Bank continues to see traction in corporate lending after several muted years, supported by stronger borrower balance sheets. Business banking loans grew 24% year-on-year, while rural advances rose more than 25%, aided partly by gold-loan demand and distribution expansion. With corporate lending picking up and retail stress easing, the bank appears well placed to sustain growth. Still, stress in exporter and MSME segments amid the West Asia war bears watching, as do trends in the credit-card book and operating costs.
The stock had risen over 2% on Monday, in response to results announced Saturday, but is down almost 4% over the past year, compared with 2% gains in the Nifty Bank index. This reflects a broader de-rating in banking stocks amid persistent selling by foreign institutional investors, Motilal Oswal Financial Services said. Valuations at about 2.6x FY27 book, based on Bloomberg consensus estimates, leave room for upside if growth sustains, supporting a gradual re-rating.
Ananya Roy is the Founder of Credibull Capital, a SEBI-registered investment adviser, where she focuses on building disciplined, research-driven investment strategies for long-term wealth creation. A CFA charterholder with an MBA in Finance from a premier IIM and an engineering degree from NIT, she combines strong academic grounding with nearly 15 years of hands-on experience across the investment management spectrum.Her career spans index construction, portfolio management, and private equity investing, giving her a 360-degree perspective on capital markets. Prior to founding Credibull Capital, she held key roles at Edelweiss, Reliance PMS, and Morningstar, where she was involved in fund management, equity research, and product development. This diverse exposure enables her to seamlessly connect macroeconomic trends with bottom-up stock selection.Ananya is known for her ability to simplify complex financial concepts and translate them into actionable insights for investors. She writes extensively on the economy, market trends, regulatory developments, and personal finance, with her work also featured in leading publications such as Moneycontrol, The Economic Times, and Financial Express.Deeply passionate about investing, she enjoys immersing herself in detailed industry analysis and company fundamentals, constantly seeking to uncover high-conviction opportunities. Her investment philosophy is rooted in patience, discipline, and a sharp focus on risk-adjusted returns.