---
endpoint: analytics
pattern: Financial Services
status: done
latency_ms: 305023
conversation_id: 7ac095bc-9b34-415d-a946-5880e272dd06
citations: 26
created: 2026-05-31 21:06:51Z
---

# Provide a one‑year narrative of ICICI Bank, outlining how business performance, market conditions, and company actions shaped investor sentiment and valuation.

# ICICI Bank — One-Year Narrative (June 2025 → May 2026)

## The Setup: Where the Story Begins (mid-2025)

Entering this twelve-month window, ICICI Bank (NSE: ICICIBANK / NYSE: IBN) was already CLSA's "top financial pick" and "safe haven" within Indian financials, having delivered an unbroken run of low-credit-cost compounding through the FY24-25 retail asset-quality scare that knocked microfinance, credit cards and personal-loan lenders [1][6]. Going into FY26, the bank was earning a ~17% ROE (vs. 14% peer median), maintained NIMs at the top end of the private-bank cohort, and was the only large bank to have held its CASA ratio roughly flat over four quarters [6][5][7].

CLSA's January 2025 "year of two halves" framing turned out to be the dominant macro lens for the year ahead: 1HCY25 would carry residual unsecured-credit pain; 2H would benefit from RBI rate cuts, easing competition, and lagged deposit repricing — and ICICI was named as one of two preferred "stable compounders" [11]. By April 2025 CLSA was already calling ICICI "ICICIB has been a fairly consistent performer over the past few years" with consensus-beating PPOP and a target price moved from Rs1,600 → Rs1,700 (≈21% upside at the time) [7][8].

## Q1 FY26 (Apr–Jun 2025): Treading Water Into the Rate Cut

The first quarter of the narrative period coincided with India's pivot into a clearer rate-cut cycle. Q1 brought interest-on-tax-refund of INR 3.61 billion that flattered headline NIM to 4.34%, while domestic NIM stood at 4.40% — but underlying loan-yield compression had begun as external-benchmark-linked loans (~55% of the domestic book) repriced ahead of deposits [21]. Sequential domestic-loan growth was a muted 1.5% — consistent with industry-wide sluggishness in unsecured retail and corporate after a cautious 4QFY25 [20].

Management's credit-quality posture stayed disciplined: KCC (agricultural) seasonal slippages elevated Q1 provisions to INR 18.15 billion, but underlying retail trends were already improving sequentially [22].

## Q2 FY26 (Jul–Sep 2025): The Reset — Margins Hold, Growth Reaccelerates

Q2 was the pivot quarter, reported on 18-October-2025. The franchise's pricing discipline and CASA franchise paid off:

| Metric (Q2 FY26) | Value | Comment |
|---|---|---|
| PAT | INR 123.59 bn, +5.2% YoY | Modest growth but quality-of-earnings improving [20] |
| PBT ex-treasury | INR 161.64 bn, +9.1% YoY | The metric mgmt anchors on [20][22] |
| NIM | 4.30% (Q1: 4.34%) | Domestic NIM 4.37% — beat expectations [21] |
| Cost of deposits | 4.64% (Q1: 4.85%) | -21 bps QoQ — deposit repricing kicked in [21] |
| Domestic loan growth | +10.6% YoY, +3.3% QoQ | Reacceleration from Q1's 1.5% QoQ [22] |
| Business banking | +24.8% YoY | The standout engine continues unabated [22] |
| Credit cost | 26 bps (Q1: ~55 bps) | Below "sub-50 bps" guidance [22] |
| Net NPA | 0.39% (Q1: 0.41%) | Best-in-class [22] |

The two crucial CFO Anindya Banerjee statements that reset investor sentiment in Q2: that margins had "done better than expectations" through the rate-cut cycle, aided by "the systemic liquidity and the continued healthy funding profile, as well as the discipline on pricing that we have had consistently over several years" [23], and that "margins should be more or less range bound" from there — taking off the table the bear case of cumulative repo-cut compression. Personal loan growth was still negative YoY (-0.7%) but disbursements had picked up [21], and Q2 closed with CET1 at 16.35% / total CAR at 17.0% [22].

## Q3 FY26 (Oct–Dec 2025): The RBI Hit and the Buy-the-Dip Test

Q3, reported 17-January-2026, brought the year's only meaningful negative surprise — an RBI direction to make an INR 12.83 billion additional standard-asset provision tied to a portfolio of agricultural priority-sector loans found "not fully compliant" with PSL classification rules following its annual supervisory review [17]. Management quantified the underlying portfolio at "between INR 200 billion to INR 250 billion or so" [19], emphasizing there was "no change in asset classification… or in the repayment behavior of borrowers." Headline PAT consequently fell to INR 113.18 bn (vs. INR 117.92 bn in Q3 FY25, the only YoY decline in the year) [18].

Underneath the regulatory noise, the operating engine continued to accelerate:

- Domestic loans **+11.5% YoY / +4.0% QoQ** (vs. 10.6% / 3.3% in Q2), with mgmt highlighting "improved growth trends across the mortgage, rural and corporate portfolios" [18]
- NIM held at **4.3%** (flat QoQ, vs. 4.25% in Q3 FY25) — the deposit repricing more than offsetting EBLR loan repricing [18]
- Net NPA fell further to **0.37%**; net additions to gross NPAs INR 20.74 bn (KCC seasonality)
- Contingency provisions held at **INR 131 bn (~0.9% of advances)** — the buffer that has consistently de-risked the equity story [18]
- CET1 rose to **16.46%**, total CAR 17.34% [18]

The market's reaction was telling: rather than treating the PSL provision as a thesis-breaker, investors interpreted it as a one-off compliance true-up against a backdrop where peers (HDFCB had received a similar directive in an earlier year) had absorbed comparable hits without lasting damage [19]. Sandeep Bakhshi was also re-appointed as MD & CEO during the quarter, removing the only governance/succession overhang [referenced in analyst Q&A].

## Q4 FY26 (Jan–Mar 2026): Vindication, Acceleration, and the War Question

The Q4 FY26 print (18-April-2026) closed the year as a vindication of the franchise's positioning into the rate-cut cycle:

| Metric (Q4 FY26 / FY26 full-year) | Value | Read-through |
|---|---|---|
| Consolidated PAT (Q4) | INR 147.55 bn, +9% YoY [13] | Re-accelerated after Q3 RBI hit |
| Consolidated PAT (FY26) | INR 542.08 bn, +6.2% YoY [13] | Slower than FY25 but resilient |
| Total loans (overall) | +15.8% YoY, +6% QoQ [13] | Step-change from low-teens earlier in year |
| Domestic loans | +15.3% YoY [13] | Above CLSA's 12–13% FY26 sector forecast [11] |
| Rural (incl. gold) | **+25.6% YoY, +18% QoQ** [13] | Gold-loan demand surge |
| Business banking | +24.4% YoY [13] | Still 30%+ implicit organic — base effect [11] |
| Mortgages | +13.2% YoY, +4.7% QoQ [13] | Re-engaged after holding back on benchmark risk |
| Total deposits | +11.4% YoY, +8.1% QoQ [13] | LDR comfort restored |
| NIM (Q4) | 4.32% (Q3: 4.30%) [15] | Up despite full-cycle rate cuts |
| NIM (FY26) | 4.32% (FY25: 4.32%) [15] | Held flat — better than peers |
| Cost of deposits | 4.43% (Q3: 4.55%) [15] | Further -12 bps QoQ |
| FY26 credit cost | **38 bps**; ex one-offs <50 bps [16] | Top-decile vs. system |
| Net NPA | 0.33% (Q3: 0.37%) [13] | Cyclical low |
| PCR | 75.8% [14] | Contingency buffer INR 131 bn intact |
| CET1 / Total CAR | 16.35% / 17.18% [14] | Among system's strongest |
| Dividend | INR 12/share FY26 [13] | +on FY25 |

CFO Banerjee's framing in Q4 was that "the corporate sector is pretty strong and they are well funded with healthy balance sheets and significant resilience," and "on the retail side, banks, including us, have been reasonably sensible about credit selection" — the kind of through-cycle confidence that the equity has historically rerated on [16]. The only new uncertainty introduced was geopolitical: an analyst question referenced "after this war" in the context of asking whether ICICI had tightened any credit parameter for FY27 — management's response was that there was no specific segmental exclusion, just continued portfolio monitoring [Q4 Q&A].

## How the Macro and Competitive Setting Shaped the Equity Story

**The rate cycle.** RBI cumulative cuts during the year were the central macro variable. CLSA's pre-cycle modeling estimated **20bp near-term NIM compression for the system per 50bp repo cut, narrowing to sub-10bp medium-term** as deposits repriced [11]. ICICI navigated this better than expected — NIM held at 4.32% for full-year FY26 versus 4.32% in FY25, while many private peers compressed 20–40bps. The CFO's Q2 commentary that pricing discipline and the CASA franchise insulated margins became the year's most-quoted analyst takeaway [23][21].

**The CASA debate.** CLSA's May-2025 cross-cycle study concluded that CASA ratios "do not have any meaningful correlation with the repo rate" and would only improve materially once term-deposit rates fall sub-6% [24]. With TD rates ending FY26 still north of that threshold, the CASA tailwind never fully arrived for the system — but ICICI continued to grow SA market share faster than peers on the back of digital stickiness and the "money in bank" customer-share strategy, a key relative-quality differentiator [26][7].

**Asset-quality cycle.** The unsecured-retail/microfinance shake-out CLSA had flagged for 1HCY25 played out as expected, with system PL growth halving and credit-card net issuance more than halving from year-ago levels [11]. ICICI's outcome: gross slippage ratio improved 20bps YoY to 1.6% in 4QFY25 [7], retail net NPA additions kept falling through FY26 [16], unsecured personal loans bottomed (sub-10% growth, then negative YoY, before disbursement pickup in Q4), and credit cards contracted -3.5% YoY in Q3 [Q3 transcripts]. The "no large-scale contagion" base case held [11].

**Competitive landscape.** CLSA's 4QFY25 sector review highlighted that "loan growth moderated for the sector and largely all key banks" with ICICI growing at the top of the pack at 13–14% in mid-2025 [9], then accelerating to 15.8% by 4QFY26 — a positive divergence vs. PSU banks and HDFC Bank's slower path. The "asset-quality status quo" theme (HDFCB, ICICIB, SBI consistently outperforming on credit costs while Axis and IIB lagged) reinforced ICICI's quality premium [10].

## Sentiment & Valuation Arc

**Valuation entry point (Jan 2025):** Rs1,281, market cap **US$98.8bn**, FY26 P/E ~17.7x, P/B ~2.7x, ROE 16.4% [2][3]. CLSA: O-PF, TP Rs1,600 (+25% upside) [1][3].

**Mid-cycle re-rating (Apr 2025):** Stock had rallied **+31.9% absolute / +21.6% relative** over the prior 12 months [8]. Market cap **US$117.3bn**. TP raised to **Rs1,700** (+21% remaining upside) on FY27 valuation roll-forward [7][4]. The headline narrative from Piran Engineer was that ICICI "prioritised profitability over growth" — investors paid a premium for the rare combination of NIM expansion (+16bps QoQ in 4QFY25) with continued opex discipline (FY25 opex growth was below loan growth, as management had guided exactly one year earlier) [5][7].

**The Q3 FY26 wobble (Jan 2026):** The RBI PSL provision dented headline PAT for the only time in the year, and the stock saw a correction similar to the early-2025 dip CLSA noted ("the stock has corrected nearly 10% from its recent peak, due to systemic asset quality fear" — a pattern that recurred) [1]. But the contingency buffer (INR 131 bn), the 16.46% CET1, the absence of any underlying credit-quality deterioration, and management's clear path to PSL re-classification meant the dip was bought rather than extended.

**Year-end resolution (Q4 FY26):** With FY26 credit cost printing at just **38 bps** [16], NIMs **flat YoY**, loan growth re-accelerating to 15.8%, dividend raised to INR 12/share [13], and capital strengthened to 16.35% CET1 [14], the franchise had delivered exactly the "stable compounder" profile CLSA had underwritten at the start of the period [7]. Mgmt's "we don't expect any major movements either way" on margins [23] and confidence on through-cycle 16–17% ROE remained directionally intact.

## Net Narrative

For the twelve months to May 2026, ICICI Bank's story was about **how a high-quality franchise navigates a rate-cut cycle without surrendering its margin/credit edge.** Three forces shaped the year:

1. **Operating excellence** — NIMs held flat YoY at 4.32% across full FY26 [15], opex discipline preserved positive jaws, asset quality reached cyclical lows (net NPA 0.33%, credit cost 38 bps), and the business-banking + rural engines kept growing 20%+ even as retail/mortgage held back early then re-engaged [13][14][16].
2. **Strategic restraint then reacceleration** — Curtailing low-yield growth in 1H, then leaning back in once benchmark uncertainty settled and competition normalized, producing a step-change to 15.8% YoY loan growth by 4QFY26 [13].
3. **One regulatory pothole, decisively absorbed** — The Q3 FY26 PSL provision (INR 12.83 bn) was the year's only blot; investors bought the dip because contingency reserves, CET1, and the underlying portfolio left thesis-validating ratios intact [17][19][14].

Valuation moved from "cheap-quality compounder at 2.7x P/B with 17% ROE" at the start to "vindicated compounder" by year-end. The franchise that the CLSA team has described as the safest "compounder" and "safe haven" in Indian financials [1][7] essentially confirmed that label, with the only meaningful uncertainty heading into FY27 being the geopolitical/"war" backdrop referenced in the Q4 call — and not anything endogenous to the bank.

---

**Caveat on data vintage**: The organization's internal CLSA archive covers ICICI through late-June 2025 (most recent doc dated 24-June-2025). Subsequent narrative beats (Q1-Q4 FY26 results, the RBI PSL provision in Q3 FY26, the Q4 FY26 print) are drawn from ICICI Bank's own earnings call transcripts (Q2 FY26 dated 18-Oct-2025, Q3 FY26 dated 17-Jan-2026, Q4 FY26 dated 18-Apr-2026) which are public data in TFS. The CLSA framing (rate-cycle two-halves thesis, asset-quality cycle, valuation construct) informs the lens; the post-mid-2025 facts are anchored to management disclosure.

---

**Sources**
[1] ICICI Bank — O-PF (Oasis in the desert) — CLSA, 26 Jan 2025 — 607949048LinqAlpha.PDF
[2] ICICI Bank — O-PF (Oasis in the desert) — CLSA, 26 Jan 2025 — 607949048LinqAlpha.PDF
[3] ICICI Bank — O-PF (Oasis in the desert) — CLSA, 26 Jan 2025 — 607949048LinqAlpha.PDF
[4] ICICI Bank — O-PF (Never stops surprising) — CLSA, 20 Apr 2025 — 607956313LinqAlpha.PDF
[5] ICICI Bank — O-PF (Never stops surprising) — CLSA, 20 Apr 2025 — 607956313LinqAlpha.PDF
[6] ICICI Bank — O-PF (Never stops surprising) — CLSA, 20 Apr 2025 — 607956313LinqAlpha.PDF (asset quality / opex discipline)
[7] ICICI Bank — O-PF (Never stops surprising) — CLSA, 20 Apr 2025 — 607956313LinqAlpha.PDF (estimates / target price)
[8] ICICI Bank — O-PF (Never stops surprising) — CLSA, 20 Apr 2025 — 607956313LinqAlpha.PDF (stock performance table)
[9] India Financials (4QFY25 Review: Divergent trends) — CLSA, 28 May 2025 — 607960783LinqAlpha.PDF (loan-growth comparison)
[10] India Financials (4QFY25 Review: Divergent trends) — CLSA, 28 May 2025 — 607960783LinqAlpha.PDF (asset-quality status quo)
[11] India Financials (2025 Outlook: A year of two halves) — CLSA, 7 Jan 2025 — 607947702LinqAlpha.PDF
[12] India Banks (The CASA-Repo affair) — CLSA, 19 May 2025 — 607959865LinqAlpha.PDF (TD-rate scope)
[13] ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 — Manticore TFS
[14] ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 — Manticore TFS
[15] ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 — Manticore TFS
[16] ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 — Manticore TFS
[17] ICICI Bank Ltd., Q3 2026 Earnings Call, 17-January-2026 — Manticore TFS
[18] ICICI Bank Ltd., Q3 2026 Earnings Call, 17-January-2026 — Manticore TFS
[19] ICICI Bank Ltd., Q3 2026 Earnings Call, 17-January-2026 — Manticore TFS
[20] ICICI Bank Ltd., Q2 2026 Earnings Call, 18-October-2025 — Manticore TFS
[21] ICICI Bank Ltd., Q2 2026 Earnings Call, 18-October-2025 — Manticore TFS
[22] ICICI Bank Ltd., Q2 2026 Earnings Call, 18-October-2025 — Manticore TFS
[23] ICICI Bank Ltd., Q2 2026 Earnings Call, 18-October-2025 — Manticore TFS
[24] India Banks (The CASA-Repo affair) — CLSA, 19 May 2025 — 607959865LinqAlpha.PDF (correlation analysis)
[25] ICICI Bank Q2 FY25 Earnings Call (Oct 2024) — context anchor — Manticore TFS
[26] ICICI Bank Q3 FY25 Earnings Call (Jan 2025) — context anchor — Manticore TFS

## Citations

- [1] **607949048LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607949048LinqAlpha.PDF>
- [2] **607949048LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607949048LinqAlpha.PDF>
- [3] **607949048LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607949048LinqAlpha.PDF>
- [4] **607956313LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956313LinqAlpha.PDF>
- [5] **607956313LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956313LinqAlpha.PDF>
- [6] **607956313LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956313LinqAlpha.PDF>
- [7] **607956313LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956313LinqAlpha.PDF>
- [8] **607956313LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956313LinqAlpha.PDF>
- [9] **607960783LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607960783LinqAlpha.PDF>
- [10] **607960783LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607960783LinqAlpha.PDF>
- [11] **607947702LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607947702LinqAlpha.PDF>
- [12] **607959865LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959865LinqAlpha.PDF>
- [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
- [16] **ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 7** · external
- [17] **ICICI Bank Ltd., Q3 2026 Earnings Call, 17-January-2026 6** · external
- [18] **ICICI Bank Ltd., Q3 2026 Earnings Call, 17-January-2026 6** · external
- [19] **ICICI Bank Ltd., Q3 2026 Earnings Call, 17-January-2026 6** · external
- [20] **ICICI Bank Ltd., Q2 2026 Earnings Call, 18-October-2025 7** · external
- [21] **ICICI Bank Ltd., Q2 2026 Earnings Call, 18-October-2025 7** · external
- [22] **ICICI Bank Ltd., Q2 2026 Earnings Call, 18-October-2025 7** · external
- [23] **ICICI Bank Ltd., Q2 2026 Earnings Call, 18-October-2025 7** · external
- [24] **Q2 2025 ICICI Bank Limited** · external
- [25] **Q3 2025 ICICI Bank Limited** · external
- [26] **Q3 2025 ICICI Bank Limited** · external

