ICICI Bank, India’s second-largest private lender, posted robust results for the July-September quarter (Q2FY25), with net profit surging 14.5 percent year-on-year to Rs 11,746 crore, surpassing Street expectations. Net interest income (NII) rose 9.5 percent YoY to Rs 20,048 crore, reflecting steady growth, although the bank's net interest margin (NIM) dipped 26 basis points (bps) to 4.27 percent.
Despite the margin contraction, the management expressed confidence that the worst of the margin pressure is now behind them. They believe further erosion will be limited as deposit rate hikes have already stabilised. Retail deposit rates surged primarily between the second halves of FY23 and FY24, but the bank does not foresee significant increases ahead.
However, wholesale deposit rates remain somewhat elevated, partly due to liquidity trends and slowdowns in credit growth.
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"Rates in the wholesale market, especially for one-year-plus deposits, stayed higher than expected. While we didn’t see the typical decline in wholesale rates during Q1, improved liquidity and softer credit growth should help going forward," the management shared during the earnings call, signaling a cautious but optimistic outlook.
On the asset quality front, ICICI Bank continued to outperform peers, with its gross non-performing asset (GNPA) ratio improving to 1.97 percent as of September 30, 2024, down from 2.15 percent in the previous quarter. The net NPA ratio remained stable at 0.42 percent, reflecting the bank's tight control over slippages.
ICICI Bank’s performance stands out compared to other private lenders like Kotak Mahindra Bank and IndusInd Bank, which reported rising stress in asset quality. The bank attributed its success to disciplined underwriting practices, careful customer selection in the personal loan segment, and effective risk management filters.
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