ICICI Bank credit growth accelerates as NIM expansion supports profitability

Investment View and Key Drivers

In its July 19, 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 accelerating credit growth, sequential net interest margin expansion despite faster lending growth, resilient asset quality and a stronger liquidity position than large private-bank peers.

Anand Rathi continues to prefer ICICI Bank over HDFC Bank, expecting its liquidity advantage to support superior medium-term loan growth and margins.

• Acceleration in credit growth across multiple business segments.
• Sequential net interest margin expansion, supported by an improved loan-to-deposit ratio.
• Resilient asset quality and the lowest credit cost among peers in Q1 FY27.
• A substantial additional provisioning buffer that is expected to largely absorb the impact of the forthcoming expected-credit-loss transition.

Loan Growth and Business Trends

ICICI Bank reported Q1 FY27 advances growth of about 19.6-19.9 per cent year on year, accelerating from 15.8 per cent in Q4 FY26. Growth was broad-based across business segments.

Retail Banking growth recovered to 12 per cent year on year after five quarters of single-digit growth. The broker attributed domestic corporate growth to higher working-capital demand, a shift away from bond-market borrowing and greater NBFC funding requirements. Anand Rathi expects loan growth of about 16 per cent over FY27E-FY28E.

Net Interest Income, Margins and Operating Performance

Q1 FY27 net interest income was Rs 244 billion, up 12.7 per cent year on year. Net interest margin expanded by 4 basis points sequentially to 4.36 per cent, or by 1 basis point after adjusting for an income-tax refund. Anand Rathi described the margin performance as a positive surprise, attributing it to a sharp improvement in the loan-to-deposit ratio alongside stable loan yields and cost of funds.

The broker expects margins to remain broadly stable, with cost-of-funds pressure offset by improved yields. Fee income rose 23.5 per cent year on year, supported by business volumes and a favourable base. Operating expenses to assets improved by 3 basis points sequentially to 2.09 per cent.

Reported Q1 FY27 profit after tax was Rs 148 billion, up 15.9 per cent year on year, while pre-provision operating profit was Rs 204 billion, up 8.7 per cent. Deposits rose 14.0 per cent year on year to Rs 18,336 billion and advances were Rs 16,313 billion.

Profitability Outlook

Anand Rathi expects stable margins, healthy fee income, improving operating leverage and moderate credit costs to keep return on equity sustainably above 15 per cent in FY27E-FY28E.

Asset Quality and Credit Costs

Asset quality remained healthy 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, the lowest among peers, aided by recoveries. Management reiterated normalised credit-cost guidance of 50 basis points. ICICI Bank maintains an additional provisioning buffer of Rs 230 billion, equivalent to about 1.4 per cent of loans. Management expects this buffer to largely absorb the impact of the forthcoming expected-credit-loss transition.

Estimate Revisions and Valuation

Following the quarterly performance, Anand Rathi raised its FY27E and FY28E estimates as follows:

The Rs 1,746 target price is based on a sum-of-the-parts valuation. The core bank is valued at 2.5 times FY28E price-to-adjusted-book value, while subsidiaries are assigned a value of Rs 225 per share.

Key Risks

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