ICICI Bank’s Earnings Call Contradictions: PSL Provisions, NIM Outlook, and Growth Strategy Don’t Match

Date of Call: Jan 17, 2026

Financials Results

• Revenue: Not explicitly provided
• EPS: Not explicitly provided
• Gross Margin: Not applicable for a bank
• Operating Margin: Not explicitly provided

Business Commentary:

Profit and Provisioning:

• ICICI Bank reported a core operating profit of INR 175.13 billion, increasing by 6% year-on-year and 2.5% quarter-on-quarter. However, the profit before tax, excluding treasury, decreased to INR 149.57 billion, down from INR 152.89 billion in the previous year.
• The decrease in profit before tax was partly due to an increase in provisions, including an additional standard asset provision of INR 12.83 billion mandated by the Reserve Bank of India.

Loan and Deposit Growth:

• The domestic loan portfolio grew by 11.5% year-on-year and 4% sequentially, with the retail loan portfolio increasing by 7.2% year-on-year and 1.9% sequentially.
• Average deposits grew by 8.7% year-on-year and 1.8% sequentially. The growth in loans and deposits was supported by strong performance in retail and rural sectors.

Credit Quality and Risk Management:

• The net NPA ratio slightly improved to 0.37% at December 31, 2025, compared to 0.42% the previous year, with gross NPA additions decreasing to INR 20.74 billion.
• Improved credit quality was observed in retail and rural portfolios, attributed to better underwriting standards and selective growth strategies in corporate lending.

Cost and Expense Management:

• Operating expenses increased by 13.2% year-on-year and 1.2% sequentially, including provisions for the new labor code and technology expenses accounting for about 11% of operating expenses.
• Despite rising costs, the bank maintained a strong capital position, which supports its risk-calibrated profitable growth strategy.

Net Interest Margin and Cost of Deposits:

• The net interest margin remained steady at 4.3%, with the cost of deposits decreasing to 4.55%.
• The stability in margins was maintained through deposit repricing and the benefit of a CRR cut, despite competitive pressures and rate cuts.

Sentiment Analysis:

Overall Tone: Neutral

• Management reported steady core operating profit growth (6% YOY), healthy loan growth across segments, and strong capital ratios. However, they acknowledged regulatory-driven provisions, margin pressure from repricing, and a sequential decline in credit card portfolio growth.

Q&A:

• Question from Mahrukh Adajania (Nuvama Wealth Management Limited): What is the size of the portfolio for the standard asset provision and its impact on OpEx, and what was the classification issue?
  Response: The portfolio is between INR 200-250 billion. The bank will work to bring it into regulatory conformity to minimize provisioning and PSL impact; no additional OpEx costs are currently called out.

• Question from Mahrukh Adajania (Nuvama Wealth Management Limited): With rate cuts and competitive mortgage pricing, how do you view margins and potential deposit repricing?
  Response: Margins are expected to remain range-bound; deposit repricing and seasonal nonaccrual impacts will be factors, but the bank is confident in sustaining NIM levels.

• Question from Rikin Shah (IIFL Research): Was there any additional PSL cost due to reclassifying agri loans as non-PSL?
  Response: PSL compliance costs have been rising generally, partly due to buying priority sector certificates, but no specific additional cost is linked to this regulatory observation; the bank will work to minimize impact.

• Question from Rikin Shah (IIFL Research): Is growth momentum improving, and will it continue?
  Response: Yes, sequential and year-on-year growth rates have picked up, and momentum is expected to sustain into Q4.

• Question from Rikin Shah (IIFL Research): What is weighing on credit card book growth?
  Response: The sequential decline is due to high festive spending billed and repaid in the prior quarter; growth is expected to improve going forward.

• Question from Kunal Shah (Citigroup Inc.): Why has the credit card portfolio been flat over recent quarters?
  Response: The decline is attributed to an unusually strong growth in Q2 due to festive spending, offset in Q3; the book should gradually improve.

• Question from Kunal Shah (Citigroup Inc.): Is corporate growth, particularly in the BBB segment, driving the improved corporate loan growth?
  Response: No, corporate growth is driven by well-funded corporates accessing bank funding, competitive pricing, and settled benchmarks; the bank is comfortable with quality and within its BBB limits.

• Question from Kunal Shah (Citigroup Inc.): Why has OpEx growth accelerated to ~13%, and will it settle?
  Response: OpEx growth was impacted by labor code provisions and rising PSL compliance costs; costs are not expected to rise at the same pace, and the bank will focus on maximizing PPOP efficiently.

• Question from Nitin Aggarwal (Motilal Oswal Securities Limited): Has business banking growth bottomed out, and will it relax?
  Response: No, business banking is growing at 22% YOY; moderation is due to the portfolio size, not a strategy, and there is untapped growth potential.

• Question from Nitin Aggarwal (Motilal Oswal Securities Limited): Will credit card NPL growth recover to above overall loan growth?
  Response: It will take time, but credit card NPLs should pick up from current muted levels.

• Question from Nitin Aggarwal (Motilal Oswal Securities Limited): Are large private banks more vulnerable to RBI's standard asset provision directive?
  Response: Management declined to comment; the bank will comply and resolve the observation as best as possible.

• Question from M. B. Mahesh (Kotak Securities): What's causing low growth in savings account deposits?
  Response: Institutional savings accounts (government entities) saw reduced balances, dampening overall savings growth, while retail savings accounts performed strongly.

• Question from M. B. Mahesh (Kotak Securities): How much are you willing to lower the share of AA/AAA in internal expectations?
  Response: The bank is comfortable with the A family ratings, focuses on risk-adjusted returns, and approaches BBB lending selectively within limits.

• Question from Parameswaran Subramanian (Investec Bank plc): Why was the CEO's term extended for 2 years instead of 3?
  Response: The Board decided on a 2-year appointment; the term now runs almost 3 years, with no further speculation beyond that.

• Question from Parameswaran Subramanian (Investec Bank plc): What drove the quarter-on-quarter yield on advances decline?
  Response: The decline was due to loan repricing impacts from repo and MCLR cuts, not primarily the KCC reversal effect.

• Question from Parameswaran Subramanian (Investec Bank plc): How should we view core fee income growth?
  Response: Fee growth was soft due to cards and payments drag; it should pick up with better loan growth and retail focus, though competitive pressures exist.

• Question from Suresh Ganapathy (Macquarie Research): What is the LCR and its expected trend post-April 2026 guidelines?
  Response: LCR was 126% in Q3; it is expected to remain similar post-guidelines, with average levels above 120% being acceptable.

• Question from Suresh Ganapathy (Macquarie Research): Is the rising LDR a constraint or just an outcome?
  Response: LDR is an outcome of funding structure and capital levels; it is at an acceptable level, not a constraint, and reliance on wholesale deposits remains moderate.

Contradiction Point 1

Provisions and PSL Compliance Impact

Contradiction on quantifying the financial impact of regulatory PSL compliance.

Regarding the standard asset provision, what is the portfolio size, impact on OpEx, and classification issue? - Mahrukh Adajania (Nuvama Wealth Management Limited)

2026Q3: The bank has already made the INR 12.83 billion additional provision as directed by the RBI. The bank will work to minimize both the provisioning and PSL impact... - [Anindya Banerjee](CFO)

Can you quantify the impact of the 25 bps repo rate cut on the loan book? - M.B. Mahesh (Kotak Securities)

2026Q1: The bank does not quantify pass-through. - [Anindya Banerjee](CFO)

Contradiction Point 2

Net Interest Margin (NIM) Outlook

Contradiction on the expected trajectory and drivers of the net interest margin.

How do you view margins with the rate cut and competitive mortgage pricing, and is deposit repricing still possible to maintain margins? - Mahrukh Adajania (Nuvama Wealth Management Limited)

2026Q3: For NIM, the steady level in Q3 was achieved despite seasonally higher nonaccrual impacts... Looking ahead to Q4, nonaccrual pressure is expected to ease. The bank expects NIM to remain range-bound... - [Anindya Banerjee](CFO)

With the change in margin calculation method, is the adjusted margin decline (excluding tax refund interest) 4-5 basis points? - Mahrukh Adajania (Nuvama Wealth Management Limited)

2026Q1: The Q3 to Q4 spike will not happen this year due to the new method, leading to more even quarterly margins. - [Anindya Banerjee](CFO)

Contradiction Point 3

Growth Outlook and PPOP Focus

The bank's stated focus shifts from emphasizing risk-calibrated PPOP growth to providing specific YoY growth rate expectations.

Is growth momentum improving, and what factors are impacting credit card book growth? - Rikin Shah (IIFL Research)

2026Q3: Growth momentum has clearly picked up sequentially in Q3 (22.8% YoY in business banking, 11.5% in domestic loans). This is expected to sustain into Q4. The YoY growth rate, while impacted by the trailing four quarters, has also improved. - [Anindya Banerjee](CFO)

Do you see early signs of growth acceleration toward mid-teens by year-end driven by government measures? - Mahrukh Adajania (Nuvama Wealth Management Limited)

2026Q2: The bank is positive on the growth outlook but will not provide a specific year-end loan growth number. They are focused on risk-calibrated PPOP growth... - [Anindya Banerjee](CFO)

Contradiction Point 4

Corporate Loan Growth Strategy

The bank's stated priority for corporate segment shifts from being active for transaction banking to indicating a more direct focus on loan origination.

Is the growth traction from the BBB-rated business banking segment? - Kunal Shah (Citigroup Inc.)

2026Q3: Corporate growth is driven by the bank's willingness to participate in well-funded corporates' funding needs where it can build franchises. - [Anindya Banerjee](CFO)

What visibility is there on continued CASA market share gains and key areas for sustained advantage? - Harsh Modi (JPMorgan Chase & Co)

2026Q2: The bank is active in the corporate space, which may reflect in transaction banking income and current accounts, but loan growth may not be the primary focus. - [Anindya Banerjee](CFO)

Contradiction Point 5

Operating Expense (OpEx) Growth Trajectory

Contradiction on the expected trend of OpEx growth between quarters.

What caused the flat credit card portfolio, particularly the higher transactor proportion? Is the corporate growth traction from the BBB-rated business banking segment? Why has OpEx growth accelerated to ~13%? - Kunal Shah (Citigroup Inc.)

2026Q3: The higher OpEx growth (13.2% YoY) is partly due to additional labor code provisions... Excluding this, operating expenses would have decreased marginally sequentially. - [Anindya Banerjee](CFO)

Will OpEx decline sequentially in Q3 following Q2's festival expenses? - Rikin Shah (IIFL Research)

2026Q2: While specific lines like festive expenses may decline, overall OpEx is not expected to increase at the same pace as Q2 due to continued business growth investments. - [Anindya Banerjee](CFO)