---
endpoint: analytics
pattern: 02 · Company fundamentals
status: done
latency_ms: 195289
conversation_id: dda67696-9288-4451-bcb1-fa25ffd91289
citations: 5
created: 2026-05-31 16:51:45Z
---

# ICICI Bank's core franchise and key components of its operating model?

# ICICI Bank — Core Franchise and Operating Model

ICICI Bank is the **second-largest private-sector bank in India**, and over the last several years has executed a deliberate transformation under CEO Sandeep Bakhshi from a high-risk corporate lender into a diversified retail-led franchise that now delivers the **highest ROE among large Indian banks under CLSA's coverage** [1][10]. The franchise is anchored by a clearly articulated operating philosophy, a granular asset mix, a structurally low-cost deposit base, and best-in-class asset quality.

---

## 1. Core Operating Philosophy — The "Principles, Coverage, Delivery" Framework

Management has codified the bank's strategy on **three pillars: Principles, Coverage and Delivery** [12].

### The Three Guiding Principles (management's own articulation):
| Principle | What it means |
|---|---|
| **Return of Capital** | Conservation of capital is paramount; capital adequacy ratios maintained well above regulatory minima [11][12] |
| **Fair to Customer, Fair to Bank** | Deliver fair value to customers while creating value for shareholders — guides product pricing, risk selection and counterparty choice [11][15] |
| **One Bank, One Team** | Whole-bank approach to a customer relationship — synergies across coverage, products, and subsidiaries [11][13] |

The strategic objective is **risk-calibrated growth in core operating profit (PBT excluding treasury)** — not growth for growth's sake [15]. CEO Bakhshi describes the operating ethos as a **"360° customer-centric approach with an aspiration to serve customers seamlessly across ecosystems, customer segments and micromarkets while fostering a strong risk and compliance culture"** [13]. Reinforcing this, the CLSA conference-call notes for 4QFY25 record management saying *"Focus remains on growing core PBT"* — i.e., profitability is prioritized over volume [5].

---

## 2. Loan Book Architecture — Granular & Diversified

CLSA characterises ICICI Bank's book as a **"granular portfolio, well diversified across industries and geographies"** with lending rates *"very competitive among banks"* (i.e., not yield-chasing) [4].

### Portfolio Composition (4QFY25, % of domestic loans) [8]
| Segment | 4QFY22 | 4QFY24 | 4QFY25 |
|---|---|---|---|
| Retail | 68% | 77% | **77%** |
| Domestic Corporate | 23% | 20% | **20%** |
| International | 5% | 2% | **2%** |

The retail-led shift is structural — international exposure has been cut from 5% to 2%, and the bank has materially de-risked by **"moving from high-risk corporate loans to high-profitability retail loans and has been consistently gaining market share in the latter"** [10].

### 4QFY25 Growth Mix (YoY)
- **Total loans:** +13% YoY (moderated from the 14–16% pace) [2]
- **Retail:** +9% YoY — unsecured personal loans deliberately curtailed to **+4% YoY** [2]
- **Business Banking:** **+30%+ YoY** — the standout engine, where management has invested across "three aspects over the years – distribution, credit underwriting and digital/technology" [5]
- **Deposits:** +14% YoY [2]

### Business Banking — the engine of incremental growth
The Business Banking segment (borrowers with turnover up to Rs 7.5 bn, formed by integrating SME, dealer funding, rural business credit and mid-corporate under one coverage umbrella) is where ICICI Bank is structurally outgrowing peers — and is what underpins CLSA's view that management *"does not have any concern for this business"* beyond pricing competition [2]. Management has explicitly invested across distribution, credit underwriting and digital/technology to scale it [5].

---

## 3. Deposit Franchise — Defensive CASA Advantage

A critical, often-underappreciated component: **ICICI Bank is the only large Indian bank that has largely maintained its CASA ratio over the past four quarters** [2].

- **CASA ratio 4QFY25: 41.8%** (4QFY24: 42.2%, 3QFY25: 40.5%) [7]
- **CASA deposits: Rs 6,737 bn, +13% YoY** [7]
- **Cost of funds 4QFY25: 5.0%** — competitive vs peers, supported by the stable CASA mix [7]

The bank cut savings deposit rates by 25 bps in April 2025, providing further NIM support as rate cuts transmit through the system [2].

---

## 4. Operating Model Output — Profitability Engine

The operating model translates into industry-leading returns. Below is the 4QFY25 P&L summary [7]:

| Metric (Rs bn) | 4QFY24 | 3QFY25 | 4QFY25 | YoY |
|---|---|---|---|---|
| Net Interest Income | 191 | 204 | 212 | +11% |
| Operating profit | 150 | 169 | 177 | +17% |
| Profit after tax | 107 | 118 | **126** | **+18%** |

### Key operating ratios (4QFY25) [7]
| Ratio | Value |
|---|---|
| NIM (on IEA) | 4.5% |
| NIM (on total assets) | 4.1% |
| Cost/Income | 39.2% |
| Credit cost | 0.3% |
| **RoA** | **2.4%** |
| **RoE** | **17.9%** |

### Peer DuPont (FY25CL) — ROA & ROE Leadership [9]
| % of avg assets | ICICIB | HDFCB | AXSB | KMB | IIB | SBI |
|---|---|---|---|---|---|---|
| Net Interest Income | 4.0 | 3.2 | 3.5 | 4.5 | 4.2 | 2.6 |
| Operating expenses | 2.1 | 1.8 | 2.4 | 2.9 | 3.0 | 1.7 |
| Provisions | 0.3 | 0.3 | 0.6 | 0.4 | 1.1 | 0.3 |
| **RoA** | **2.2** | 1.7 | 1.7 | 2.2 | 1.2 | 1.1 |
| Leverage (x) | 7.9 | 8.1 | 9.5 | 6.2 | 8.4 | 16.1 |
| **RoE** | **17.8** | 13.9 | 15.7 | 13.3 | 10.1 | 16.9 |

CLSA's read: **"Its ROE should remain healthy at 16%–17% (2–3ppts higher than peers)"** [6].

---

## 5. Risk & Asset Quality — Best-in-Class

Asset quality is the cornerstone of the franchise. From the FY24 6-K: *"Emphasis was laid on deepening coverage and enhancing delivery capabilities while continuing the focus on appropriate risk and reward... a 360° customer-centric approach and exploring opportunities across ecosystems and micromarkets"* [11].

### Asset quality (4QFY25) [3][7]
- **Gross slippage ratio: 1.6%** (–20 bps YoY) — beating expectations even as the system shows stress
- **GNPL ratio: 1.7%** (–49 dps YoY); NNPL ratio: 0.4%
- **Credit cost: 0.3%** — aided by a Rs 28 bn corporate NPA sale
- **Provision coverage: 76.9%**

Management commentary: corporate and business banking portfolios are "very strong"; unsecured retail NPA formation has stabilised, with the cohort originated in the past 18 months performing better [3]. The risk discipline is institutionalised — the bank carries **contingency provisions of ~INR 131 bn (~1% of total loans)** above the regulatory minimum, an explicit conservatism buffer [14].

---

## 6. Key Components of the Operating Model — Synthesis

Putting the pieces together, ICICI Bank's franchise rests on six interlocking components:

| Component | Description | Evidence |
|---|---|---|
| **1. Principles-led culture** | Return of Capital / Fair to Customer, Fair to Bank / One Bank, One Team — anchors every decision | [11][12] |
| **2. 360° customer-centric coverage** | Holistic relationship across ecosystems, micromarkets and value chains; integrated industry-specific solutions (STACKS for real estate, GIFT City, capital markets) | [12][13] |
| **3. Granular, diversified loan book** | 77% retail+business banking, 20% corporate, 2% international; no segment-specific targets — growth follows risk-reward | [4][8][12] |
| **4. Stable, low-cost deposit franchise** | CASA ratio defended at ~42% — only large bank to do so through the cycle; competitive cost of funds advantage | [2][7] |
| **5. Risk-calibrated profitability** | Strategic objective explicitly stated as risk-calibrated growth in core PBT-ex-treasury, not loan-volume targets; contingency buffer ~1% of loans | [12][14] |
| **6. Continuous tech / delivery investment** | iMobile, InstaBIZ, ICICI STACK, API Banking platform; Business Banking scaled on distribution + underwriting + digital | [5][15] |

CLSA's bottom line on the franchise: ICICI Bank *"is gradually moving from high-risk corporate loans to high-profitability retail loans and has been consistently gaining market share... Its asset quality has improved meaningfully in the past three years and credit costs are best-in-class"* [10]. The 4QFY25 prints — a quarter described as one where **"the bank prioritised profitability over growth"** — show the operating model intact, with margin expansion, opex restraint and asset-quality strength all delivering at once [3][6].

---

**Sources**
[1] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 Apr 2025) — 607956313LinqAlpha.PDF
[2] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 Apr 2025) — Loan growth & CASA commentary
[3] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 Apr 2025) — Asset quality
[4] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 Apr 2025) — Granular portfolio
[5] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 Apr 2025) — Conference call: Business Banking
[6] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 Apr 2025) — Top pick rationale & ROE
[7] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 Apr 2025) — 4QFY25 summary table
[8] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 Apr 2025) — Retail/SME/Corporate/International mix
[9] ICICI Bank - O-PF (Oasis in the desert) — CLSA (26 Jan 2025) — Banks DuPont comp
[10] ICICI Bank - BUY (Focusing on ESG) — CLSA (28 May 2024) — Investment thesis
[11] ICICI Bank 6-K (Annual Report FY24, "Our Business Strategy") — Core principles
[12] ICICI Bank 6-K-body (FY25 MD&A) — Three pillars: principles, coverage, delivery framework
[13] ICICI Bank 6-K (Message from Wholetime Directors) — 360° customer-centric approach
[14] ICICI Bank Q2 FY25 Earnings Call — Contingency provisions & risk-calibrated growth
[15] ICICI Bank Annual Report FY21 — Risk-calibrated growth in core operating profit

## Citations

- [11] **2024 6-K ICICI Bank Limited** · external
- [12] **2025 6-K ICICI Bank Limited** · external
- [13] **2023 6-K ICICI Bank Limited** · external
- [14] **Q2 2025 ICICI Bank Limited** · external
- [15] **ICICI Bank Ltd. (IBN-IN) - Annual Report for period end 31-Mar-2021 (English) - PDF** · external

