ICICI Bank credit growth acceleration and stronger NIM support sustained profitability

Investment View and Key Thesis

In its 19 July 2026 result update, Anand Rathi Research maintained its BUY rating on ICICI Bank with a target price of Rs 1,746, compared with the current market price of Rs 1,444. The positive view is based on broad-based acceleration in loan growth, sequential net interest margin expansion despite faster growth, resilient asset quality and a strong liquidity position.

The broker believes ICICI Bank’s liquidity position can sustain a relative growth and margin advantage over peers. Anand Rathi continues to prefer ICICI Bank over HDFC Bank, citing ICICI Bank’s higher liquidity coverage ratio and surplus cash and investments.

Loan Growth Accelerates Across Segments

ICICI Bank reported Q1 FY27 advances growth of 19.6% year on year, accelerating from 15.8% in Q4 FY26. Growth was broad based across key business segments.

Retail Banking growth recovered to 12% after five quarters of single-digit growth. The report attributes domestic corporate lending growth to higher working-capital demand, a shift from bond-market borrowing and higher NBFC funding requirements. Anand Rathi expects loan growth of about 16% over FY27E-FY28E.

Q1 FY27 Financial Performance

Net interest income was Rs 244 billion, up 12.7% year on year, while non-interest income rose to Rs 86 billion. Total income increased 9.4% year on year to Rs 330 billion. Pre-provision operating profit rose 8.7% to Rs 204 billion, and profit after tax increased 15.9% year on year to Rs 148 billion.

Margins, Fees and Operating Leverage

Net interest margin expanded by 4 basis points sequentially to 4.36%, or 1 basis point after adjusting for an income-tax refund. Anand Rathi attributes the margin performance to a sharp improvement in the loan-to-deposit ratio alongside stable yields and cost of funds.

The broker expects margins to remain broadly stable, as pressure on funding costs should be offset by better yields. Fee income grew 23.5% year on year, supported by higher business volumes and a favourable base. Operating expenses to assets improved by 3 basis points sequentially to 2.09%, supporting operating leverage.

Resilient Asset Quality and Provisioning Buffer

Asset quality remained resilient despite seasonally higher agricultural slippages. Gross and net slippages were 143 and 70 basis points respectively, compared with 186 and 90 basis points in Q1 FY26 and 116 and 32 basis points in Q4 FY26.

Credit cost was 32 basis points, aided by recoveries, while management reiterated normalised credit-cost guidance of 50 basis points. ICICI Bank retains an additional provisioning buffer of Rs 230 billion, equivalent to about 1.4% of loans. Management expects this buffer to largely absorb the effect of the expected-credit-loss transition.

Earnings Outlook and Return on Equity

Anand Rathi expects stable margins, healthy fee income, controlled operating expenses and moderate credit cost to keep return on equity sustainably above 15% over FY27E-FY28E. Following the update, the broker raised its FY27E and FY28E profit-after-tax estimates by 0.5% and 2.8%, respectively.

Valuation and Target Price

The Rs 1,746 target price is based on a sum-of-the-parts valuation comprising 2.5 times FY28E price-to-adjusted-book value for the core bank, plus Rs 225 per share for subsidiaries.

Key Risks

• Lumpy slippages in the corporate book.
• Lower-than-expected credit growth.