ICICI Bank Q3: Growth Intact Despite RBI Hit

RBI Supervisory Action Weighs on Headline Profit

ICICI Bank’s fiscal third quarter of 2026 showed resilient core performance but softer headline earnings after additional provisions tied to a Reserve Bank of India (RBI) directive. Profit before tax excluding treasury fell to INR 149.57 billion from INR 152.89 billion a year earlier, while profit after tax declined to INR 113.18 billion versus INR 117.92 billion. Management attributed much of the earnings drag to an additional standard asset provision of INR 12.83 billion arising from the RBI’s annual supervisory review of certain agricultural priority sector loans.

Executive Director Anindya described the affected book as a “portfolio of agricultural priority sector credit facilities” where terms were not fully compliant with regulatory requirements for classification as agricultural priority sector lending (PSL). He emphasized there was “no change in asset classification” for these loans and no change to borrower terms or repayment behaviour. The bank expects to carry the extra provision until the loans are repaid or renewed in line with PSL guidelines, and estimated the underlying portfolio at “between INR 200–INR 250 billion.”

Management also pointed to treasury as another temporary headwind. A treasury loss of INR 1.57 billion contrasted with a gain of INR 3.71 billion in the prior‑year quarter, further narrowing reported profit growth. On an adjusted basis that excludes the incremental standard‑asset provisioning, ICICI said profit before tax excluding treasury would have risen 6.2% year over year to INR 162.40 billion and profit after tax 4.1% to INR 122.80 billion.

Core Operating Performance and Margin Stability

Despite the higher provisions, the bank underlined steady expansion in its underlying business. Managing Director and CEO Sandeep Bakhshi said core operating profit rose 6% year over year and 2.5% sequentially to INR 175.13 billion. Net interest income increased 7.7% year over year and 1.9% sequentially to INR 219.32 billion, with the net interest margin at 4.3%, unchanged from the previous quarter and slightly higher than 4.25% a year earlier.

Management cited loan repricing linked to repo and MCLR changes, along with lower deposit costs and the impact of a cash reserve ratio cut, as key drivers of margin performance. The cost of deposits declined to 4.55%, from 4.64% in the prior quarter and 4.91% a year earlier. Looking ahead, executives said they expect non‑accrual impacts, including seasonal effects from Kisan Credit Card non‑performing assets, to ease in the fourth quarter, and reiterated that net interest margin should remain “range‑bound” around current levels.

Non‑interest income excluding treasury rose 12.4% year over year and 2.3% sequentially to INR 75.25 billion. Fee income grew 6.3% year over year and 1.2% sequentially to INR 65.72 billion, with about 78% of fees coming from retail, rural and business banking customers. Dividend income from subsidiaries was INR 6.81 billion, higher than a year earlier, largely due to an interim dividend from ICICI Securities.

Loan, Deposit and Segment Trends

ICICI Bank reported broad‑based balance sheet growth in the quarter ended 31 December 2025. Average deposits grew 8.7% year over year and 1.8% sequentially, while total deposits were up 9.2% year over year and 2.9% sequentially. Current and savings account (CASA) deposits increased 8.9% year over year and 1.5% sequentially, and the average liquidity coverage ratio stood at about 126%, indicating a comfortable liquidity position.

On the lending side, the domestic loan portfolio expanded 11.5% year over year and 4% sequentially, with overall loan growth including international branches also at 11.5% year over year and 4.1% sequentially. Within this, retail loans rose 7.2% year over year and 1.9% sequentially and, including non‑fund‑based exposures, accounted for 42.2% of total loans. Business banking grew 22.8% year over year and 4.7% sequentially, while the domestic corporate book increased 5.6% year over year and 6.5% sequentially.

Retail product trends were mixed. Mortgages increased 11.1% year over year and 3.2% sequentially, and commercial vehicles and equipment loans rose 7.9% year over year and 3.2% sequentially. Auto loans grew modestly at 0.7% year over year and 0.9% sequentially, and personal loans were up 2.4% year over year and 1.7% sequentially. The credit card portfolio declined 3.5% year over year and 6.7% sequentially, which management attributed mainly to heavy festive spending in the preceding quarter that boosted balances, followed by repayments.

Asset Quality, Provisions and Capital Strength

Credit quality indicators remained strong despite the higher standard‑asset provisioning. The bank’s net non‑performing assets ratio improved to 0.37% at 31 December 2025, from 0.39% at 30 September 2025 and 0.42% a year earlier. Provision coverage on non‑performing loans was 75.4%, and ICICI also held contingency provisions of INR 131 billion, equivalent to about 0.9% of total advances.

Gross NPA additions were INR 53.56 billion in the quarter, down from INR 60.85 billion a year ago. Recoveries and upgrades, excluding write‑offs and sales, totalled INR 32.82 billion, resulting in net additions of INR 20.74 billion. Retail and rural gross NPA additions were INR 42.77 billion, including INR 7.36 billion from Kisan Credit Card accounts, which management noted typically see higher slippages in the first and third fiscal quarters. Corporate and business banking gross NPA additions were INR 10.79 billion, with net additions of INR 3.36 billion. Gross NPAs written off were INR 20.46 billion, and INR 1.2 billion of NPAs were sold for cash.

Corporate exposures remained diversified. Loans and non‑fund‑based outstanding to non‑banking financial companies and housing finance companies stood at INR 791.18 billion, about 4.3% of advances. The builder portfolio was INR 680.83 billion, also about 4.3% of total loans, with roughly 1.1% internally rated BB and below or classified as non‑performing. Loans and non‑fund‑based exposures to performing corporate borrowers rated BB and below were INR 33.92 billion, around 0.2% of advances. Capital ratios stayed strong, with a CET1 ratio of 16.46% and total capital adequacy of 17.34%, including profits for the first nine months of FY26.

Expenses, Expansion and Strategic Focus

Operating expenses rose 13.2% year over year and 1.2% sequentially in the quarter. Employee expenses increased 12.5% year over year, including INR 1.45 billion of provisions made “on an estimated basis” related to India’s new labour code. Non‑employee expenses were up 13.6% year over year, reflecting higher business volumes and continued investment in distribution and technology.

The bank expanded its physical network, adding 402 branches in the first nine months of FY26 to reach 7,385 branches as of 31 December 2025. Technology remained a significant cost component, accounting for about 11% of operating expenses over the period. Management reiterated its strategy of “risk‑calibrated, profitable growth” supported by a customer‑centric “360‑degree” operating model, and highlighted a focus on maintaining strong provisioning and capital buffers while pursuing market share gains in selected segments.