ICICI Bank Maintains Strong Loan Growth, Buy Rating Reiterated by MOFSL

MOFSL reiterates 'Buy' on ICICI Bank, citing resilient performance, strong technology adoption, and steady growth across retail and business segments. The brokerage maintains a target price of ₹1,670 and expects the bank to deliver RoA/RoE of 2.3 per cent/16.7 per cent by FY27E. ICICI Bank has sustained healthy loan growth of ~15 per cent CAGR over FY23-25, driven by retail and business banking. The bank's cost-to-income ratio improved to 37.8 per cent in Q1FY26.

Motilal Oswal Financial Services (MOFSL) has reiterated its 'Buy' rating on ICICI Bank, citing the lender's resilient performance, strong technology adoption, and steady growth across retail and business segments. The brokerage firm maintains a target price of ₹1,670, valuing the stock at 2.7x FY27E adjusted book value (ABV) plus a sum of the parts (SoTP) of ₹270, and expects the bank to deliver return on assets/return on equity (RoA/RoE) of 2.3 per cent/16.7 per cent by FY27E [2].

ICICI Bank has sustained healthy loan growth of ~15 per cent CAGR over FY23-25, driven primarily by retail and business banking. The brokerage projects a ~16 per cent CAGR over FY26-28E, even as unsecured loan growth stabilizes at 12.8 per cent of the loan book. Vehicle finance has been subdued due to demand softness, though recovery is expected in H2FY26 on the back of easing borrowing costs and lower taxes [2].

Business Banking has emerged as a key growth engine, recording 34 per cent Y-o-Y growth in FY25 (~30 per cent in Q1FY26) and now contributing ~20 per cent of total loans. The segment is supported by investments in distribution, underwriting, and digital capabilities. The portfolio remains granular and well-diversified, with low credit costs. Retail and rural loans grew more modestly at 6.1 per cent Y-o-Y in Q1FY26, but continue to make up the largest share of the book at 58.5 per cent [2].

The bank's cost-to-income ratio improved to 37.8 per cent in Q1FY26, despite continued investments in expansion and technology. Core fee income rose ~15 per cent in FY25, led by retail, business banking, transaction banking, FX, and derivatives. Opex growth is projected at ~11 per cent Y-o-Y over FY25–27E, with the cost-to-income (C/I ratio) expected to moderate further to ~36 per cent by FY28E [2].

Digital adoption remains a cornerstone as ~95 per cent of individual financial transactions are conducted online. Platforms such as iMobile Pay (10m+ users) and InstaBIZ (3m+ SMEs) are scaling rapidly, alongside innovations like API Banking 2.0 and upgraded remittance systems [2].

ICICI Bank maintains strong asset quality, with a provision coverage ratio (PCR) at 76 per cent and contingent provisions of ₹13,100 crore (~1 per cent of loans). Gross non-performing asset/net non-performing asset (GNPA/NNPA) are expected to remain steady at 1.6 per cent/0.4 per cent by FY27. Credit costs could inch up as recoveries moderate, but robust buffers provide cushion. Capitalisation is comfortable, with Tier-1 at 15.7 per cent and CAR at 16.3 per cent. The bank’s segmental performance is balanced – Retail PBT grew 15 per cent Y-o-Y in FY25 (35 per cent of total profits), Treasury PBT jumped 26 per cent Y-o-Y, while Corporate PBT rose 8 per cent Y-o-Y amid subdued demand [2].

That said, analysts at MOFSL believe ICICI Bank is well-positioned to sustain its profitability trajectory. "The continued improvement in asset mix, limited NIM compression, and healthy growth in Business Banking and select retail segments position the bank to deliver robust performance," the brokerage noted [2].

References:
[1] https://m.economictimes.com/markets/stocks/news/stocks-in-news-ril-indigo-icici-bank-tvs-motor-infosys/amp_articleshow/123567833.cms
[2] https://www.business-standard.com/markets/news/mofsl-reiterates-buy-on-icici-bank-what-s-driving-its-bullish-outlook-125090300119_1.html