ICICI Bank Q2 Profit Rises 20% to ₹14,843 Crore; Margin Slips

ICICI Bank reported a 20.1% rise in standalone net profit for the July–September quarter, beating analyst estimates on the back of strong fee income, lower provisions and a sharp improvement in asset quality. The one blemish was a narrower net interest margin, which the lender attributed largely to the foreign-currency deposits it mobilised through a Reserve Bank of India swap window.

Standalone profit for the second quarter of FY27 came in at ₹14,843 crore, against ₹12,359 crore a year earlier, according to results approved by the board on Saturday, 17 October. Analysts had expected about ₹14,366 crore, as per a poll cited by NewsDrum. Consolidated profit, which includes the bank’s insurance, securities and asset management subsidiaries, rose 22.3% to ₹16,333 crore from ₹13,357 crore.

Core income holds up, treasury turns negative

Net interest income, the difference between what the bank earns on loans and pays on deposits, grew 17.7% to ₹25,339 crore from ₹21,529 crore, slightly ahead of the ₹25,166 crore that analysts had pencilled in. Core operating profit, which strips out treasury, rose 21.8% to ₹20,805 crore, as reported by Business Standard.

The treasury book was a drag. ICICI Bank posted a treasury loss of ₹230 crore for the quarter, compared with a gain of ₹220 crore in the same period last year, amid volatile bond yields. Fee income made up for much of that, climbing 20.1% to ₹7,795 crore. Roughly three-fourths of fees came from retail, rural and business banking customers, a mix that tends to be more stable than corporate fees.

Provisions fell 6.9% year-on-year to ₹851 crore and were 32.5% lower than the ₹1,260 crore set aside in the April–June quarter. The bank continues to carry contingency provisions of ₹13,100 crore, along with ₹1,283 crore of additional standard-asset provisions on its agricultural priority-sector book that it made in the third quarter of FY26 at the RBI’s direction.

Margin squeezed by FCNR deposits

Net interest margin slipped to 4.18%, from 4.36% in the previous quarter and 4.30% a year ago, and came in below the roughly 4.3% the Street expected. Excluding interest on income tax refunds, the margin was 4.28%. That refund benefit added eight basis points in the first quarter but was negligible this time.

The bigger factor was the bank’s heavy use of the RBI’s swap facility for FCNR(B) deposits. ICICI Bank raised about $18 billion through the window, according to reports. Those funds sit in international branches and are lent at thinner spreads, which inflates headline balance-sheet growth while diluting margins. Group CFO Anindya Banerjee told analysts the dip reflected a larger share of overseas assets and a sharp rise in retail term deposits.

Management expects some further pressure on margins in the October–December quarter as the full effect of these deposits feeds into average balances, with a possible recovery in the fourth quarter.

Balance sheet swells

The FCNR inflows are visible across the balance sheet. Loans rose 30% year-on-year and 12.3% sequentially to about ₹18.32 lakh crore. Stripping out international-branch loans funded by FCNR(B) money, growth was a more modest 24.1% year-on-year and 7.3% quarter-on-quarter, while the domestic loan book expanded 22.8%.

Within that, retail and rural loans grew 14.8% and now account for 51.6% of the portfolio. Business banking rose 33.8% and domestic corporate loans 30.6%, a sign that working-capital and project demand from companies has picked up. Asked whether the corporate surge was a temporary liquidity play, Banerjee said, “It is not really… a temporary thing from a liquidity perspective.”

Deposits rose 27.1% year-on-year to about ₹20.50 lakh crore. Excluding FCNR(B) deposits, the increase was 17% year-on-year and 3.1% sequentially, a more realistic measure of the bank’s organic deposit-raising.

Asset quality improves further

Gross non-performing assets fell to 1.20% of loans, from 1.38% in June and 1.58% a year earlier. Net NPAs eased to 0.30% from 0.35% and 0.39% respectively, with a provision coverage ratio of 75%. Fresh slippages to bad loans were ₹4,833 crore, lower than ₹5,034 crore a year ago, while recoveries and upgrades of ₹3,620 crore left net additions at ₹1,213 crore. The bank wrote off ₹1,592 crore during the quarter.

Management indicated that normalised credit costs could rise to “up to 50 basis points” over time, a reminder that the current low provisioning run-rate may not last indefinitely.

Capital remains comfortable. Total capital adequacy stood at 16.68% and the common equity tier-1 ratio at 16.01%, well above the regulatory minimums of 11.70% and 8.20%. During the quarter, ICICI Bank also bought an additional 2% stake in ICICI Prudential Life Insurance for ₹1,470 crore.

What it means for investors

For shareholders, the quarter answers one worry and raises another. Earnings growth above 20%, falling bad loans and robust fees support the case brokerages have long made for ICICI Bank as a steady compounder among large private lenders. Elara Capital called it a “preferred pick among large private sector peers” and set a target of ₹1,720, while Nirmal Bang has a Buy rating with a target of ₹1,840, according to Business Standard.

The margin trajectory is the open question. Axis Bank, which also reported on Saturday, raised $10.62 billion in FCNR(B) deposits during the quarter, so sector-wide margins could stay under pressure for another quarter even as loan growth looks strong on paper. Investors will need to separate swap-driven growth from underlying momentum when comparing results.

The stock opened marginally higher on Monday, trading at ₹1,406 at 9:17 am, up 0.67%, according to Business Standard.

What comes next

The board has also approved an application to the RBI to retain Pradeep Kumar Sinha as non-executive part-time chairperson from 1 July 2027 to 16 February 2029. The bank, which added 145 branches in the first half and now operates 7,656, will be watched closely on whether margins bottom out in the December quarter as guided. The next data point for the sector comes when Kotak Mahindra Bank reports its numbers on 24 October.