---
endpoint: analytics
pattern: Financial Services
status: done
latency_ms: 191402
conversation_id: 446261ca-ee90-4ec7-a094-7fed129230c0
citations: 4
created: 2026-05-31 18:12:17Z
---

# What is ICICI Bank’s core business franchise and the key components of its operating model?

# ICICI Bank — Core Business Franchise & Operating Model

## 1. What the Franchise Is

ICICI Bank (NSE: ICICIBANK; ADR: IBN) is **India's second-largest private-sector bank** [1]. Under CEO Sandeep Bakhshi, it has undergone a strategic transformation away from a corporate-heavy book toward a **retail-led, high-profitability franchise**, consistently gaining market share in retail and recording the **highest estimated ROE among all large banks under CLSA's coverage** [1]. The reported ROE printed **17.9% with ROA of 2.4%** in 4QFY25 [5].

The franchise is structured as a **financial-services holding** with a standalone bank at the core plus six subsidiaries spanning life insurance, general insurance, asset management, securities, and home finance — together forming a one-stop financial supermarket valued via SOTP [6][9]:

| Entity | Stake | Business |
|---|---|---|
| ICICI Bank (parent) | 100% | Standalone bank — lending, deposits, fees |
| ICICI Prudential Life Insurance | 51% | Life insurance |
| ICICI Lombard General Insurance | 52% | General insurance |
| ICICI Prudential AMC | 51% | Mutual funds / asset management |
| ICICI Securities | 100% | Broking / wealth (de-listed, now fully owned) |
| ICICI Home Finance | 100% | Mortgages |

[6][9]

## 2. The Strategic Framework — Management's Stated Operating Model

Management articulates the operating model around one explicit financial KPI and one customer-engagement philosophy:

> *"At ICICI Bank, strategic focus continues to be on growing **profit before tax, excluding treasury** through the **360-degree customer-centric approach** and by serving opportunities **across ecosystems and micro markets**. We continue to operate within the framework of our **values to strengthen our franchise**. Maintaining high standards of governance, **deepening coverage and enhancing delivery capabilities** with a focus on **simplicity and operational resilience** are key drivers for our **risk-calibrated profitable growth**."* [12]

The five pillars in this construct:

- **Core PBT (ex-treasury) as the north-star metric** — Insulates the P&L from market volatility and forces discipline on the underwriting/fee engine; CLSA's call notes confirm "focus remains on growing core PBT" [7][12].
- **360-degree customer coverage** — Cross-sell across the parent + subsidiary product shelf (banking, insurance, AMC, broking, home finance) [12].
- **Ecosystems and micro-markets** — Granular, geography-by-geography market penetration rather than national broad-brush marketing [12].
- **Risk-calibrated growth** — Growth is throttled against credit/macro signals; CLSA explicitly describes recent quarters as ones where the bank "prioritised profitability over growth" [7].
- **Operational resilience + simplicity** — Continued investment in digital/technology stack and process simplification [8][12].

## 3. Balance-Sheet Composition (The Loan Book)

The franchise is now decisively **retail-tilted** with corporate and SME materially smaller:

**CLSA's loan-mix table (4QFY25, end-March 2025)** [2]:

| Segment | % of loan book |
|---|---|
| Retail | **77%** |
| Domestic Corporate | 20% |
| International | 2% |
| SME (now consolidated with Business Banking) | — |

The shift from 67% retail in 3QFY22 to **77% by 4QFY25** is the clearest visible signature of the strategic re-pivot under Bakhshi [2]. By the latest disclosure (4QFY26, year-end March 2026), including non-fund-based outstandings, **retail accounts for 41.7% of the total portfolio** on the broader cut, while the **rural portfolio (including gold loans) grew +25.6% YoY**, **business banking +24.4% YoY**, and **domestic corporate +9.0% YoY** — signalling that the next leg of growth is now coming from rural + business banking rather than retail alone [13]. The overall loan book grew **+15.8% YoY** with overseas just **2.7%** of total [13].

Within retail, the sub-mix in 4QFY26 was:
- Mortgages +13.2% YoY
- Auto loans +1.7% YoY
- Commercial vehicles / equipment +11.6% YoY
- Personal loans +7.2% YoY
- Credit cards **–5.6% YoY** (deliberate moderation in unsecured)

[Source: same Q4 FY26 transcript chunk as 13]

CLSA's longer-run loan-growth track [11]:

| Period | Loan book (Rs tn) | YoY |
|---|---|---|
| 4QFY22 | 8.6 | 17% |
| 4QFY24 | 11.8 | 16% |
| 4QFY25 | 13.4 | 13% |

## 4. Funding Franchise — The Deposit Engine

The liability side is anchored on a **strong CASA franchise**, with **CASA at ~42% in 4QFY25** [3]. Total deposits grew **+11.4% YoY** at 31-Mar-2026 and **average CASA +11.3% YoY** in 4QFY26, with **average LCR of ~126%** — comfortably above regulatory thresholds [13][12]. The funding model is augmented by a network of **7,511 branches** (528 added in FY26) [15].

## 5. Profitability Engine — NIM, Fees, Costs

**a) Net Interest Margin (NIM)**: Reported NIM expanded from ~3.9% (1QFY22) to a 4.9% peak (4QFY23), then settled at **4.4% in 4QFY25** [4]. CLSA cites "sustaining NIM above 4%" as a key catalyst [1].

**b) Fee income mix**: **~78% of total fees come from retail, rural and business banking customers** — i.e., the granular customer-engagement engine — with only ~22% from corporate/large clients [15]. This validates the "core PBT ex-treasury" framework: management is structurally distancing reported earnings from corporate-event fees and treasury MTM noise.

**c) Cost discipline**: Operating expenses grew +11.5% YoY in FY26, with **technology expenses ~11% of opex** — reflecting the explicit digital investment leg [15]. CLSA highlights management's track record of delivering opex growth ≤ loan growth [1].

## 6. Asset Quality & Capital Architecture

The risk-management leg of the operating model has delivered visibly:

| Metric | 4QFY22 | 4QFY24 | 4QFY25 | 4QFY26 |
|---|---|---|---|---|
| Gross NPL ratio | 3.8% | 2.2% | **1.7%** | n/a |
| PCR | 79% | 81% | **77%** | **75.8%** |
| Net NPA ratio | — | — | 0.39% | **0.33%** |

[10][13]

Capital remains a fortress: **CET1 16.35% and total CAR 17.18% at March 31, 2026** (after proposed dividend impact) [14]. The bank also holds **contingency provisions of INR 131bn (~0.9% of total advances)** as an additional buffer beyond standard provisioning [14]. Credit cost in FY26 was just **38 bps** (≤50 bps adjusted) [15].

## 7. Business Banking — The "Hidden" Growth Engine

CLSA's takeaways from the conference call detail the **Business Banking** model that has emerged as a key growth vector alongside retail [7][8]:

- **Three pillars of investment**: distribution, credit underwriting, and digital/technology [7]
- **Granular, diversified portfolio** across industries and geographies [8]
- **Not a high-yield business** — lending rates are deliberately competitive vs peers [8]

This segment grew **+24.4% YoY in 4QFY26** [13] — i.e., the bank is using a structurally lower-yield product to lock in mid-market customer relationships, then cross-selling fee products and deposits on top. Classic 360-degree-coverage execution.

## 8. The Holding-Company Value Stack

CLSA's SOTP captures how the franchise breaks down economically [6]:

| Component | Stake | Value (Rs bn) | Rs/share |
|---|---|---|---|
| Parent bank (residual income) | — | 10,328 | 1,450 |
| ICICI Pru Life Insurance | 51% | 502 | 70 |
| ICICI Home Finance | 100% | 214 | 30 |
| ICICI Pru AMC | 51% | 584 | 82 |
| ICICI Securities | 100% | 402 | 56 |
| ICICI Lombard General Insurance | 52% | 506 | 71 |
| Subsidiaries total | | 2,208 | 310 |
| Less: 20% holding-company discount | | (442) | (62) |
| **Target price** | | | **1,700** |

For the standalone bank, CLSA uses a residual-income model with **cost of equity 12.8%** (risk-free 7%, risk premium 5.25%, beta 1.1) and **long-term ROE assumption of 18%** [9].

---

## Synthesis

ICICI Bank's franchise can be summarised in one sentence: **a retail-led, CASA-funded private bank running a 360-degree cross-sell across a 7-entity financial-services group, optimised against a single internal KPI — core PBT excluding treasury — within a risk-calibrated growth envelope.** The operating model rests on (i) a 77%-retail loan book [2], (ii) a 42%-CASA deposit base [3], (iii) sub-50bp credit cost reflecting tightly-managed underwriting [13][15], (iv) 17%+ ROE delivered consistently [5], (v) ~78% of fees sourced from granular retail/rural/business-banking customers [15], and (vi) capital buffers (CET1 16.35%, contingency provisions of 0.9% of advances) that give management optionality to absorb shocks without breaking the growth cadence [14].

---

**Sources**

[1] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 Apr 2025) — 607956313LinqAlpha.PDF — Investment thesis (chunk 59)
[2] ICICI Bank - O-PF — CLSA — Loan mix table by segment (chunk 36)
[3] ICICI Bank - O-PF — CLSA — CASA ratio history (chunk 38)
[4] ICICI Bank - O-PF — CLSA — Reported NIM history (chunk 39)
[5] ICICI Bank - O-PF — CLSA — Quarterly ROA / ROE table (chunk 44)
[6] ICICI Bank - O-PF — CLSA — New SOTP target Rs1,700 (chunk 53)
[7] ICICI Bank - O-PF — CLSA — Conference-call business updates (chunk 28)
[8] ICICI Bank - O-PF — CLSA — Business Banking commentary (chunk 29)
[9] ICICI Bank - O-PF — CLSA — SOTP / RI model methodology (chunk 49)
[10] ICICI Bank - O-PF — CLSA — GNPL ratio & PCR history (chunk 41)
[11] ICICI Bank - O-PF — CLSA — Loan growth table (chunk 33)
[12] ICICI Bank Ltd., Q4 FY2026 Earnings Call — 18 Apr 2026 — CEO Sandeep Bakhshi opening remarks
[13] ICICI Bank Ltd., Q4 FY2026 Earnings Call — Deposits, loan portfolio segment growth, asset quality
[14] ICICI Bank Ltd., Q4 FY2026 Earnings Call — Capital adequacy (CET1, CAR, contingency provisions)
[15] ICICI Bank Ltd., Q4 FY2026 Earnings Call — Fees mix, opex, branches, credit cost

## Citations

- [12] **ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 7** · external
- [13] **ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 7** · external
- [14] **ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 7** · external
- [15] **ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 7** · external

