---
endpoint: analytics
pattern: Financial Services
status: done
latency_ms: 195466
conversation_id: 37bd940e-2724-4c43-867b-988cc33eb456
citations: 16
created: 2026-05-31 21:05:37Z
---

# What’s the bull case bear case for ICICI Bank?

# ICICI Bank (ICICIBANK / IBN) — Bull Case vs. Bear Case

**Setup**: Synthesizing internal CLSA research (latest deep-dive: ICICI Bank "Never stops surprising" — Outperform with TP Rs1,700, published 20-Apr-2025 [1]) with the most recent public disclosure — the **Q4 FY2026 earnings call held 18-Apr-2026** [10]. ICICI Bank uses an April–March fiscal year, so "FY2026" refers to the year ended 31-Mar-2026 (its most recently reported full year, per company IR convention). Note that the internal CLSA archive's latest sync is mid-2025, so the FY26 quarterly cadence is from the public transcript while the thesis framing is from CLSA's last anchor note.

---

## Quick Snapshot (latest reported — Q4 FY26 / FY26)

| Metric | Q4 FY26 | FY26 | Comment |
|---|---|---|---|
| PAT (standalone) | INR 137.0bn (+8.5% YoY) | INR 501.5bn (+6.2% YoY) | [10] |
| Net Interest Income | INR 229.8bn (+8.4% YoY) | — | [12] |
| NIM | **4.32%** (vs 4.30% QoQ) | 4.32% (flat YoY) | [12] |
| Loan growth (overall) | +15.8% YoY (+6% QoQ) | — | [10] |
| Deposit growth | +11.4% YoY (+8.1% QoQ) | — | [10] |
| Net NPA ratio | **0.33%** (vs 0.39% YoY) | — | [10] |
| Credit cost | 3bps in the quarter | **38bps** for FY26 (<50bps adj.) | [13] |
| CET1 / Total CAR | **16.35% / 17.18%** | — | [11] |
| FY26 dividend | Rs12/share recommended | — | [10] |
| CLSA TP / Rating | **Rs1,700 / O-PF** (+21% upside as of Apr-25) | — | [7] |
| CLSA ROE forecasts | FY25A 17.7% → FY26CL 15.5% → FY27CL 16.1% → FY28CL 16.5% | — | [5] |

---

## BULL CASE

### 1. "Best-in-class" execution — CLSA's anchor thesis
CLSA frames ICICI Bank as "**one of our top financial picks**" and "a fairly consistent performer over the past few years," noting that "in the current retail asset quality cycle, it has proven itself to be among the best, given consistently benign credit costs," with ROE forecast to remain "**healthy at 16%-17% (2-3ppts higher than peers)**" [4]. CLSA's published catalyst list is explicit: "**High-teens loan growth, aided by retail lending, and sustaining NIM above 4% are key catalysts for the stock**" [6]. The April 2025 update was titled "Never stops surprising," and reiterated ICICIB (with Bandhan) as their "**top bank pick**" after the 4QFY25 print delivered an 8%/11% beat on PPOP/PAT [1].

### 2. Profitability that has held up against rate cuts
- **NIM resilience**: Despite a 75bps cumulative repo cut assumption baked into CLSA's model [4], the bank delivered NIM of **4.32% in Q4 FY26** (up 2bps QoQ), with management guiding that margins should be "**range-bound from hereon**" as deposit repricing offsets benchmark resets [12]. CLSA highlighted earlier that ICICIB "is the only large bank which has largely maintained its CASA ratio over the past four quarters" [2].
- **Mix advantage**: 56% of domestic loans are EBLR/repo-linked, 13% MCLR, and **31% are fixed-rate** — providing some structural protection against rate-cut-driven yield compression [12].
- **DuPont quality**: CLSA's DuPont decomposition shows ROA holding at 2.1–2.2% through FY28CL with ROE recovering from 15.5% in FY26 to 16.5% by FY28 [5].

### 3. Asset quality at a multi-year best
- **Net NPA ratio of 0.33%** at Mar-26 (vs 0.37% Dec-25 and 0.39% Mar-25) is the cleanest balance sheet in years, with **PCR at 75.8%** plus **contingency provisions of INR 131bn (~0.9% of advances)** as a buffer [10][11].
- **FY26 credit cost was just 38bps**, and even on an adjusted basis (stripping out KCC one-offs and corporate recoveries) "the credit cost was **under 50 basis points in fiscal 2026**" [13]. Management said it doesn't "**at the moment see any cause for concern**" on credit quality, with the corporate book "**pretty strong and they are well funded with healthy balance sheets and significant resilience**" [16].
- CLSA's read in April 2025: "Asset quality as stable as it gets," with corporate/business banking "doing well" and unsecured retail NPA formation "**stabilised**" [3][8]. The unsecured retail portfolio originated in the past 18 months "has been [better]" [8].

### 4. Capital cushion + diversified franchise
- **CET1 of 16.35%** and total CAR of 17.18% after the proposed dividend leave the bank "very healthy capital levels, and strong funding and liquidity" to fund growth [11][15]. Management emphasized intent to "leverage that to grow the business within our parameters of risk" [15].
- **Subsidiary optionality**: ICICI Life VNB margin rose to **24.7%** (FY26) from 22.8%; ICICI General PAT grew to INR 27.7bn from INR 25.1bn; ICICI AMC and ICICI Securities both delivered double-digit PAT growth — these provide a stable, growing SOTP contribution to the parent value [10].

### 5. Valuation not stretched
- CLSA's residual-income model values ICICIB at Rs1,700 (FY26 PE ~20.8x / **PB 3.0x**, falling to ~2.3x by FY28) with a noted "**12M Fwd P/E**" trading "**below long-term average**" of ~17.5x [5][7]. Implied +21% upside as of mid-April 2025 [7].

---

## BEAR CASE

### 1. Margin compression risk is real, even with mix advantages
- Cost of deposits has climbed from 3.5% (4QFY22) to **~5.0% (4QFY25)** — a ~150bps grind that ICICIB has only partially offset [9]. Even management concedes that "Yields have, of course, this quarter seen the impact of the December repo cut" and only sees margins as "range-bound" rather than expanding [12].
- ICICIB's bull-case catalyst — "**sustaining NIM above 4%**" — is the floor [6]. CLSA's DuPont forecasts NII/assets dropping from 4.1% (FY25A) to **3.8% in FY26CL** before stabilising [5].

### 2. ROE moderation is already in consensus models
- CLSA's own forecasts show **ROE stepping down from 17.7% (FY25A) to 15.5% in FY26CL** [5], a structural ~200bps de-rating driven by lower NIM and slower revenue growth.
- FY26 EPS growth is forecast at only **+2%** vs FY25 in the CLSA model (Rs66.1 → Rs67.6), with the recovery only kicking in from FY27 (+18%) [5]. Near-term EPS momentum is thin.

### 3. Operating leverage is going the wrong way
- **OpEx grew 12% YoY in Q4 FY26 and 11.5% for FY26 — running above net interest income growth (8.4%)** [12][14]. The bank added 528 branches in FY26 and is investing through the cycle, but the "positive jaws" question on the analyst call drew a non-committal answer from the CFO [14].

### 4. Deposit growth is lagging loan growth — funding squeeze
- Period-end **deposit growth at 11.4% YoY vs loan growth at 15.8% YoY** — a 440bps gap [10]. Analysts on the call explicitly flagged that "the overall deposit growth is lower than in the system" and that the bank is "**losing the market share**" on deposits after gaining it in prior years. Management's response: it "is not something that will constrain us from pursuing loan growth," but the LCR averaged 126% — still adequate, but the trend is unfavorable.

### 5. Pockets of portfolio weakness
- **Credit card book declined 5.6% YoY** and 1.3% sequentially in Q4 FY26 (second consecutive quarter of decline) — analysts probed whether this is "seasonal or are you taking any interventions in terms of trying to boost profitability" [15]. Industry-wide revolver rates are coming down, hurting unit profitability.
- **Personal loan growth only ~4-7% YoY** (CLSA noted "unsecured personal loan growth is quite slow at 4% YoY" in April 2025 [2]; the Q4 FY26 call reported +7.2% YoY [15]) — well below historical levels as the bank deliberately pulled back on unsecured retail.
- **Builder portfolio at INR 714bn (4.2% of loans)** — a sequential build that management called comprising "well-established builders," with 0.9% rated BB-and-below or NPA [15]. A latent quality watch-item.

### 6. Geopolitical / macro overhang flagged by management itself
The CFO acknowledged on the Q4 FY26 call that "since March, the conflict in West Asia has clouded the outlook in the sense that it has created some amount of uncertainty" [15]. Analysts pressed on whether ICICIB has "**tightened any credit parameter**" — management said no specific tightening but flagged segments that "require closer monitoring." The business banking book (one of the fastest-growing at +24.4% YoY) has been "tested through COVID, the energy dislocation of 2022, and then the whole tariff issue and has held up reasonably well" — but the new West Asia shock is a fresh, untested variable [16].

### 7. Valuation is no longer cheap on absolute terms
- At **PB ~3.0x FY26** and PE ~21x [5], the stock is no longer the deep-value Indian large-cap it was in 2020-21. Forward P/ABV has expanded from ~1.0x (Apr-2020) to **~2.5x today** — close to the post-COVID high [5]. The "+21% upside to Rs1,700" embeds CLSA's confidence that ROE stays at 16-17% indefinitely; any disappointment compresses the multiple [5][7].

### 8. Repo-rate transmission ahead
- CLSA flagged in April 2025 that ICICIB "**will start to see repo rate transmission into deposit rates**" and that "Worst of CASA pressure is likely behind" but did not quantify rate-cut impact on margins [Catalysts/Deposits/margins commentary]. The Q4 FY26 call confirmed the December repo cut has flowed through, with further deposit repricing "left" [12] — so the medium-term NIM walk remains a contested debate.

---

## Synthesis

The bull case is essentially **"compounder"**: a 16-17% ROE franchise [4] with a sub-50bp credit-cost regime [13], 16.35% CET1 [11], a 15.8% YoY loan book [10], and the cleanest large-private-bank asset quality in India today (0.33% NNPL [10]). CLSA's published view is unambiguously constructive — Outperform, top pick, Rs1,700 TP [4][7].

The bear case is **"the easy money has been made"**: ROE peaks in FY25, OpEx is outpacing NII [12][14], deposits are losing share to peers, the credit card business is shrinking, and valuation at 3x PB no longer prices in either disappointment or a fresh geopolitical shock that management has explicitly cited as a risk [15]. Even in CLSA's bull base case, **FY26 EPS grows only 2%** before a normalized trajectory resumes [5].

The pivot point is **NIM defense**: if 4Q-FY26's 4.32% holds and the unsecured book reaccelerates in FY27 without re-igniting credit costs, the bull case dominates. If margins drift below 4% and OpEx growth stays at 11-12%, the operating-leverage screen turns negative and the premium compresses.

---

**Sources**
[1][2][3][4][5][6][7][8][9] ICICI Bank — O-PF (Never stops surprising), 607956313LinqAlpha.PDF — CLSA, 20-Apr-2025
[10][11][12][13][14][15][16] ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 (Manticore TFS index)

## Citations

- [1] **607956313LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956313LinqAlpha.PDF>
- [2] **607956313LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956313LinqAlpha.PDF>
- [3] **607956313LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956313LinqAlpha.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] **607956313LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956313LinqAlpha.PDF>
- [10] **ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 7** · external
- [11] **ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 7** · external
- [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
- [16] **ICICI Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 7** · external

