ICICI Bank Ltd Quarterly Results Q3 FY 25 stock analysis

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Sector Outlook: Positive

Net Profit up 15%; Decent performance across all parameters

The bank reported Net Interest Income (NII) of Rs 20,371 crores in Q3FY25, showing a 1.6% growth quarter-on-quarter (QoQ) and a 9% increase year-on-year (YoY). Operating expenses for the quarter were Rs 10,552 crores, up 0.5% QoQ and 4.9% YoY. Pre-provision operating profit (PPOP) was Rs 16,887 crores, growing 1% QoQ and 14.7% YoY. The bank’s net profit for the quarter stood at Rs 11,792 crores, increasing 0.4% QoQ and 14.8% YoY. The Net Interest Margin (NIM) came in at 4.25%, down slightly by 2 bps QoQ and 18 bps YoY. The Gross NPA ratio improved to 1.96%, dropping by 1 bps QoQ and 34 bps YoY, while the Net NPA ratio stood at 0.42%, down 2 bps YoY. The CASA ratio (Current Account Savings Account) remained stable at 39%, compared to 38.9% in Q2FY25 and 39.4% in Q3FY24. Gross advances grew to Rs 13,14,366 crores, up 2.91% QoQ and 13.92% YoY, while gross deposits reached Rs 15,20,309 crores, increasing 1.5% QoQ and 14.1% YoY. The Capital Adequacy Ratio (CAR) stood at 14.71%, down 64 bps QoQ but up 10 bps YoY. The bank added 129 branches in Q3FY25, expanding its network to 6,742 branches and 16,277 ATMs and cash recycling machines as of December 31, 2024.

Key Concall Highlights

Domestic Loan Book Composition:

1. 31% fixed interest rate loans.
2. 52% linked to the repo rate.
3. 16% linked to MCLR and older benchmarks.
4. 1% linked to other external benchmarks.
Customer Approach: The bank focuses on a 360-degree customer-centric approach, offering holistic and collaborative solutions.
Portfolio Quality: The management is confident about the portfolio’s quality, with lower credit costs compared to the bank’s overall credit cost.
Investments: The bank will continue to invest in technology and human resources, while maintaining a strong balance sheet with contingent provisions.
Unsecured Retail Loans: While there were increased slippages in the past six quarters, corrective steps have been taken, and the trends are now stabilizing. Improvement is expected in upcoming quarters.
Fee Income Growth: Total fee income grew 16.3% YoY, with 78% contributed by retail, rural, and business banking segments.
Transaction Platforms: The bank’s transaction platforms are performing well, driving new customer acquisition and increased adoption.
Customer Focus: Digital platforms have helped improve customer loyalty, supporting stable growth in deposits going forward.
Yield on Advances: A slight 8 bps decline in yield was due to interest reversals on KCC (Kisan Credit Card) slippages, where interest for longer periods was reversed.
Mortgage Loans: There has been some slowdown in mortgage loan growth due to price competition.
Car Financing: The bank primarily focuses on new car financing, but the market has slowed.
Retail Lending Platform: The bank’s iLens platform is evolving and now integrates retail credit cards.
Credit Costs: Credit costs may increase slightly, but no significant rise is expected.
Branch Expansion: The bank added 129 branches in Q3FY25, bringing the total to 6,742 branches and 16,277 ATMs and cash recycling machines as of December 31, 2024.
Liquidity: The bank maintains a strong liquidity position with an average Liquidity Coverage Ratio (LCR) of 123% for the quarter.
Unsecured Segment Trends: Improvements have started in the unsecured segment, with positive growth expected in the coming quarters.

Valuation and Outlook

ICICI Bank, India’s second-largest private bank, reported strong results for Q3FY25, with net profit growing by nearly 15%. The bank showed solid credit growth of 15% this quarter, driven by the Retail, Business Banking, and SME segments. Margin pressure has eased, and further rate cuts could bring some impact on net interest margins (NIMs). Fee income growth remains strong. While other banks face challenges with asset quality, ICICI Bank has kept its NPA ratios stable. The bank also launched DigiEase, a digital platform to simplify business banking onboarding and integrate digital services. This initiative aims to improve efficiency, enhance customer experience, and stabilize the cost-to-income ratio. Overall, ICICI Bank performed well, supported by strong loan growth, stable asset quality, and industry-leading return ratios.