ICICI Bank says sequential doubling of Q1 provisions seasonal, on low base
This story was originally published at 19:35 IST on 19 July 2025
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MUMBAI/NEW DELHI – The sequential doubling of ICICI Bank Ltd.'s provisions in the June quarter was on a low base and led by seasonal factors, the bank's management said in a post-earnings media call. The on-year rise in fresh slippages was marginal and in line with the rise in the loan book.
ICICI Bank's provisions more than doubled on quarter to INR 18.15 billion in Apr-Jun and were up 36.2% on year. However, the March quarter provisioning of INR 8.91 billion was the lowest in four quarters. The management said that seasonally, Apr-Jun and Oct-Dec provisioning numbers rise due to agricultural loans, and the increase in the reporting quarter's provisions was due to provisioning for Kisan Credit Card loans.
Moreover, the year-ago figure had been distorted by a INR-3.89-billion write-back on account of regulations of alternative investment funds being clarified, the management said. Without the impact of the writeback in provisions, back-of-the-envelope calculations show the bank's provisions rose only 5.4% on year.
"So we are quite comfortable with the overall quality of the portfolio. And secondly, as we have mentioned, we have to see it from the fact that it is on a very low base," Executive Director Sandeep Batra said on the call. "...but even with this, the provisions during the quarter are just about 10.4% of the core operating profit, about 0.53% of average advances."
While asset quality trends have stabilised in the personal loan portfolio over the quarter, growth in the segment has slowed to 1.4% on year in the June quarter from around 25% a year ago. Going ahead, the management said it hopes the portfolio will start growing, and the bank's strategy does not differentiate between extending unsecured or secured loans to customers, provided they meet the credit and profitability thresholds of the bank. ICICI Bank's overall retail loan book grew 6.9% on year to INR 7.21 billion in Apr-Jun.
As for corporate loans, the bank highlighted the availability of other borrowing avenues and internal accruals for large institutional borrowers, including the bond market, where rates have fallen after the Reserve Bank of India's Monetary Policy Committee cumulatively cut the policy repo rate by 100 basis points between February and June. Some borrowing needs are also lower at the beginning of the financial year, and due to competition among large lenders to expand the portfolio.
"And some of the slowdown is because of competitive pricing. There has been a bit of a repayment which has happened in the large corporate book," Batra said. The bank's corporate loan book grew 7.5% on year, and contracted 1.4% on quarter, to INR 2.76 billion as of Jun. 30.
Overall, domestic loans grew 12% on year to INR 13.31 trillion as of Jun. 30, net of short-term borrowing held on the date. The overall growth came from the business banking book, which rose 29.7% on year to INR 2.73 billion "across the length and the breadth of the country", the management said. This portfolio takes into account borrowers of up to INR 7.5 billion, and is part of the bank's 360-degree approach to providing banking products to clients.
On the liability front, the bank said it was happy to grow its deposits at a faster pace than the system, and going ahead, the growth in both the credit and deposit books would be in the context of systemic growth. ICICI Bank's deposits were up 12.8% on year at INR 16.09 trillion as of Jun. 30, against banking system deposit growth of 10.1% on year as of Jun. 27, according to RBI data.
Batra also said the bank was very well capitalised, and he did not see the need to raise equity capital at all at this point of time. Instead, loan growth would be funded by internal accruals. The bank's tier-I capital adequacy ratio of around 15.31% was very comfortable, and it also posted a "decent" return on equity, the management said.
Earlier in the day, the bank declared its results for the June quarter. ICICI Bank posted a 15.5% on-year rise in net profit to INR 127.68 billion. Its net interest income grew 10.6% on year to INR 216.35 billion. However, the lender's net interest margin declined to 4.34%, compared to 4.41% in the previous quarter and 4.36% a year ago.
After the repo rate cuts, the bank's management said it expects the net interest margin to compress further in Jul-Sept. Beyond that, a confluence of factors, including easier liquidity, may help the bank protect its margins, the lender said. The RBI has announced a 100 bps cut in the cash reserve ratio effective in four tranches between September and end-November, to 3% of a bank's net demand and time liabilities. The central bank expects this to help the net interest margin by about 7 bps.
While not ruling out further repo rate cuts, the management said it expects economic growth to be stronger in Oct-Mar from Apr-Sept based on the measures taken by the RBI as well as the government, in the form of tax cuts in the Union Budget for 2025-26 (Apr-Mar). However, the bank declined to give guidance on either its loan growth or net interest margins for FY26.
A key component of the net profit in the June quarter was the rise in other income, which grew 22% on year to INR 85.05 billion. The management attributed this to a rise in the income from subsidiaries, which paid a higher dividend in the reporting quarter due to an improvement in their business performance.
Along with the earnings release, the bank's board approved the acquisition of ICICI Prudential Pension Funds Management Co. Ltd. for INR 2.04 billion. The pension fund manager was earlier held by the group's insurance arm. The management said the synergy between its group companies would remain, and it would be a "win-win" for the bank, the pension fund and the insurance firm.
"...We felt that the 100% subsidiary will be able to better synergise in line with what we are trying to do in the bank, which we are talking about is customer 360 degrees," Executive Director Batra said. "And with specific focus on senior citizen and wealth segments, I think it will complement what is happening within the bank and also the subsidiary itself would receive an impetus." On Friday, shares of ICICI Bank closed 0.5% higher at INR 1,425.80 on the National Stock Exchange. End
Reported by Aaryan Khanna and Gowri Lakshmi
Edited by Tanima Banerjee
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