ICICI Bank Limited 2027 Q2 Earnings Call

Good evening to all of you, and welcome to the ICICI Bank earnings call to discuss the results for Q2 of FY 2027. Joining us today on this call are Sandeep Batra, Rakesh Jha, Ajay Kumar Gupta, Anindya, and Abhinek. At ICICI Bank, our strategic focus continues to be on growing profit before tax, excluding treasury, through the 360-degree customer-centric approach and by serving opportunities across ecosystems and micro markets. The profit before tax, excluding treasury, grew by 23.4% year-on-year to ₹199.54 billion in this quarter. The core operating profit increased by 21.8% year-on-year to ₹208.05 billion in this quarter. The core operating profit, excluding dividend from subsidiaries, increased by 25% year-on-year to ₹203.42 billion in this quarter. The profit after tax grew by 20.1% year-on-year to ₹148.43 billion in this quarter.

Total deposits grew by 27.1% year-on-year and 11.8% sequentially at September 30, 2026. Average deposits grew by 21.2% year-on-year and 8% sequentially, and average current and savings accounts deposits grew by 10.7% year-on-year and 1.4% sequentially during this quarter. The bank has mobilized gross FCNR deposits of about $18 billion pursuant to RBI swap facility. Excluding FCNR deposits, total period end deposits grew by 17% year-on-year and 3.1% sequentially at September 30, 2026. The bank's average liquidity coverage ratio for the quarter was about 126%. The overall loan portfolio, including the international branches, grew by 30% year-on-year and 12% sequentially at September 30, 2026. Excluding loans provided by international branches of the bank against FCNR deposits, total loans grew by 24.1% year-on-year and 7.3% sequentially.

The retail and rural portfolio grew by 14.8% year-on-year and 3.2% sequentially. Including non-fund-based outstanding, the retail and rural portfolio was 43% of the total portfolio. The business banking portfolio grew by 33.8% year-on-year and 11.1% sequentially. The domestic corporate portfolio grew by 30.6% year-on-year and 10.4% sequentially. The domestic loan portfolio grew by 22.8% year-on-year and 6.8% sequentially at September 30, 2026. The overseas loan portfolio was 7.8% of the overall loan book at September 30, 2026. The net NPA ratio was 0.3% at September 30, 2026, compared to 0.5% at June 30, 2026, and 0.39% at September 30, 2025. During the quarter, there were net additions of ₹12.13 billion to gross NPAs, excluding write-offs and sale. The total provisions during the quarter were ₹8.51 billion or 4.1% of core operating profit and 0.2% of average advances.

The provisioning coverage ratio on non-performing loans was 75% at September 30, 2026. In addition, the bank continues to hold contingency provisions of ₹131 billion or about 0.7% of total advances at September 30, 2026. The capital position of the bank continued to be strong with a CET1 ratio of 16.01% and total capital adequacy of 16.68% at September 30, 2026. The bank purchased 2% additional shareholding in ICICI Life Insurance Limited for consideration of ₹14.7 billion during the quarter. Looking ahead, we see many opportunities to drive risk-calibrated, profitable growth and grow market share across key segments. We remain focused on maintaining a strong balance sheet, prudent provisioning, and healthy levels of capital while delivering sustainable and predictable returns to our shareholders. I now hand the call over to Anindya.

Thank you, Sandeep. I will talk about loan growth, credit quality, P&L details, and the performance of subsidiaries. On loan growth, we have revised the presentation of loans to reflect a consolidated view of the retail and rural portfolio with additional product-wise details. The comparable data for previous periods have also been provided on slides 64 and 65 of the investor presentation. Coming to the growth across retail and rural products, the mortgage portfolio grew by 15.3% year-on-year and 3.5% sequentially. Vehicle loans grew by 7.8% year-on-year and 1.4% sequentially. Personal loans grew by 16.6% year-on-year and 4.7% sequentially. The credit card portfolio declined by 9.7% year-on-year and 0.2% sequentially. Jewel loans grew by 79.4% year-on-year and 4.5% sequentially.

Within the corporate portfolio, the total outstanding to NBFCs and HFCs was ₹1,033.78 billion at September 30, 2026, compared to ₹920.52 billion at June 30, 2026. The total outstanding loans to NBFCs and HFCs were about 4.3% of our advances at September 30, 2026. The builder portfolio, including construction finance, lease rental discounting, term loans, and working capital, was ₹788.52 billion at September 30, 2026, compared to ₹747.21 billion at June 30, 2026. The builder loan portfolio was 4% of our total loan portfolio. Our portfolio largely comprises well-established builders, and this is also reflected in the sequential increase in the portfolio. About 0.5% of the builder portfolio at September 30, 2026, was either rated double B and below internally or was classified as non-performing. Moving on to credit quality. The gross NPA additions were ₹48.33 billion in the current quarter compared to ₹50.34 billion in Q2 of last year.

Recoveries and upgrades from gross NPAs, excluding write-offs and sale, were ₹36.20 billion in the current quarter compared to ₹36.48 billion in Q2 of last year. The net additions to gross NPAs were ₹12.13 billion in the current quarter compared to ₹13.86 billion in Q2 of last year. The gross NPA additions from the retail and rural portfolio were ₹37.09 billion in the current quarter compared to ₹40.49 billion in Q2 of last year. Recoveries and upgrades from the retail and rural portfolio were ₹26.04 billion in the current quarter compared to ₹26.10 billion in Q2 of last year. The net additions to gross NPAs in the retail and rural portfolio were ₹11.05 billion in the current quarter compared to ₹14.39 billion in Q2 of last year.

The gross NPA additions from the corporate and business banking portfolios were ₹11.24 billion in the current quarter compared to ₹9.85 billion in Q2 of last year. Recoveries and upgrades from the corporate and business banking portfolios were ₹10.16 billion in the current quarter compared to ₹10.38 billion in Q2 of last year. There were net additions to gross NPAs of ₹1.08 billion in the current quarter in the corporate and business banking portfolios compared to net deletions of ₹0.53 billion in Q2 of last year. The gross NPAs written off during the quarter was ₹15.92 billion. Further, there was sale of NPAs of ₹1.33 billion for cash in the current quarter. The non-fund-based outstanding to borrowers classified as non-performing was ₹22.51 billion as of September 30, 2026, as compared to ₹22.07 billion as of June 30, 2026, and ₹23.22 billion as of September 30, 2025.

The loans and non-fund-based outstanding to performing corporate borrowers rated double B and below was ₹35.47 billion at September 30, 2026, as compared to ₹34.85 billion at June 30, 2026, and ₹36.61 billion at September 30, 2025. This portfolio was about 0.2% of our advances at September 30, 2026. The total fund-based outstanding to all standard borrowers under resolution, as per various guidelines, declined to ₹11.85 billion at September 30, 2026 from ₹13.63 billion at June 30, 2026, and ₹16.24 billion at September 30, 2025. At the end of September, the total provisions, other than specific provisions on fund-based outstanding to borrowers classified as non-performing, were ₹238.15 billion or 1.3% of loans.

This includes the contingency provisions of ₹131 billion as well as general provision on standard assets, provisions held for non-fund-based outstanding to borrowers classified as non-performing, fund and non-fund-based outstanding to standard borrowers under resolution and the double B and below portfolio. The bank also continues to hold additional standard asset provision of ₹12.83 billion made in Q3 of FY 2026 as directed by RBI in respect of the agricultural priority sector portfolio till completion of the review process. Moving on to the P&L details. Net interest income increased by 17.7% year-on-year and 3.9% sequentially to ₹253.39 billion in this quarter. The net interest margin was 4.18% in this quarter compared to 4.36% in the previous quarter and 4.30% in Q2 of last year. Excluding the benefit of interest on tax refund, the net interest margin would have been 4.28% in the previous quarter.

The domestic NIM, excluding benefit of interest on income tax refund, was 4.32% in the current quarter compared to 4.36% in the previous quarter and 4.37% in Q2 of last year. The cost of deposits was 4.50% in this quarter compared to 4.41% in the previous quarter and 4.64% in Q2 of last year. The increase in proportion of the assets of overseas branches in the total assets and the large sequential increase in the retail term deposit base has led to a moderation in margins, and the full impact would reflect in the third quarter, after which we expect the margins to start moving back up even based on the current level of policy rates.

Of the total domestic loans, interest rates on about 57% of the loans are linked to the repo rate and other external benchmarks, 14% to MCLR and other older benchmarks, and the remaining 29% of loans have fixed interest rates. Non-interest income, excluding treasury, grew by 12.5% year-on-year to ₹82.77 billion in Q2 of FY 2027. Fee income increased by 20.1% year-on-year to ₹77.95 billion in this quarter. Fees from retail, rural and business banking customers constituted about 75% of the total fees in this quarter. Fee income for the quarter includes fee for providing lending facilities against FCNR deposits. Dividend income from subsidiaries was ₹4.63 billion in this quarter compared to ₹8.1 billion in Q2 of last year, primarily reflecting the shift in timing of dividend declaration from quarterly to half-yearly basis by ICICI Prudential AMC Limited.

On costs, the bank's operating expenses increased by 8.5% year-on-year and 1.9% sequentially in this quarter. Employee expenses increased by 13.5% year-on-year. Non-employee expenses increased by 5.6% year-on-year. Our branch count has increased by 145 in H1 of 2027. We had 7,656 branches as of September 30, 2026. The technology expenses were about 11.2% of our operating expenses in H1 of the current year. The total provisions during the quarter were ₹8.51 billion, or 4.1% of core operating profit and 0.2% of average advances, compared to the provisions of ₹9.14 billion in Q2 of last year. Adjusting for one-off corporate recoveries, standard asset provision on loans provided against FCNR deposits and seasonality of KCC provisioning, the normalized credit cost to advances would be about 50 basis points. The profit before tax, excluding treasury, grew by 23.4% year-on-year to ₹199.54 billion in Q2 of this year.

There was a treasury loss of ₹2.3 billion in this quarter as compared to a gain of ₹1.5 billion in the previous quarter and ₹2.2 billion in Q2 of last year, reflecting market movements. The tax expense was ₹48.81 billion in this quarter compared to ₹43.21 billion in the previous quarter and ₹40.25 billion in Q2 of last year. In the previous quarter, the bank had written back tax provision of ₹4.46 billion pursuant to favorable tax orders. The profit after tax grew by 20.1% year-on-year to ₹148.43 billion in this quarter. The consolidated profit after tax grew by 22.3% year-on-year to ₹163.33 billion in this quarter. The details of the financial performance of key subsidiaries are covered in slides 37 to 39 and 58 to 63 in the investor presentation.