A New Low for the Margin, a New Low for the Cheap-Deposit Base
The quarter ended September 30, 2024 (Q2 FY2025, "Q2-2025" in the bank's own labeling) extends the trend the last two posts have tracked, and pushes both key numbers to fresh lows for this site's ICICI Bank coverage. Net interest margin» fell to 4.27%, down from 4.53% a year earlier and 4.36% the prior quarter - the lowest NIM reading since this site began covering the bank, and a full 38 basis points below the 4.65% peak flagged in the 2022-12 post. The average CASA» ratio fell to 38.9%, its lowest level yet and down from 40.8% a year earlier - a fresh low that closes out a full two years of continuous erosion from the 44.6% reading two years earlier.
Despite both structural headwinds, profit growth held up: net interest income grew 9.5% year-on-year to Rs. 20,048 crore, core operating profit grew 12.1% to Rs. 16,043 crore, and standalone profit after tax grew 14.5% year-on-year to Rs. 11,746 crore. The gap between margin compression and continued profit growth is being bridged by volume and non-interest income, not by cost control alone - fee income grew 13.3% year-on-year to Rs. 5,894 crore, and cost-to-income improved further to 38.6% from 40.9% a year earlier, a genuine efficiency gain even as funding costs rose.
Domestic loan growth of 15.7% year-on-year held roughly steady with the prior quarter, though the mix within it shifted: retail loan growth slowed to 14.2% year-on-year (from 17.1% the prior quarter) while business banking kept accelerating at 30.0% - the retail engine that's driven this site's coverage of the bank so far is showing its first signs of deceleration.
The Prescription
ICICI Bank's business-banking growth (+30.0% year-on-year) and cost discipline (cost-to-income down to 38.6%, its best reading in this site's coverage) are both worth continuing without change - they're doing real work to offset the margin and CASA headwinds rather than just papering over them. Asset quality also stayed genuinely strong, with net additions to gross NPAs falling to Rs. 1,754 crore from Rs. 2,624 crore the prior quarter, and the gross NPA ratio improving to 1.97% from 2.15%.
What deserves closer scrutiny going forward: retail loan growth decelerating to 14.2% year-on-year, its slowest pace across the quarters this site has covered, at exactly the moment CASA is also at its weakest. If the retail engine that historically both grew the loan book and anchored the cheap-deposit base is slowing on both fronts simultaneously, that's a bigger structural question than either metric moving alone - worth watching closely in the next 1-2 quarters to see whether this is a temporary dip or the start of a genuine slowdown in the bank's core growth story (see Which Segment Is Actually Carrying the Business below).
Key Financial Metrics
Q2 FY2025 (quarter ended September 30, 2024) vs. Q2 FY2024 (quarter ended September 30, 2023) - standalone, Indian GAAP, reported in Rs. crore
| Metric | Q2 FY2025 | Q2 FY2024 | YoY |
|---|---|---|---|
| Net Interest Income | Rs. 20,048cr | Rs. 18,308cr | ✅ +9.5% |
| Non-interest income (excl. treasury) | Rs. 6,496cr | Rs. 5,861cr | ✅ +10.8% |
| - of which Fee income | Rs. 5,894cr | Rs. 5,204cr | ✅ +13.3% |
| Core operating profit (PPOP») | Rs. 16,043cr | Rs. 14,314cr | ✅ +12.1% |
| Provisions (excl. tax) | Rs. 1,233cr | Rs. 583cr | ⚠️ +111.5% |
| Profit before tax | Rs. 15,490cr | Rs. 13,646cr | ✅ +13.5% |
| Net Income (Profit after tax, standalone) | Rs. 11,746cr | Rs. 10,261cr | ✅ +14.5% |
| Weighted-average annualised EPS | Rs. 66.2 | Rs. 58.3 | ✅ +13.6% |
| Book value per share (period-end) | Rs. 368.3 | Rs. 308.5 | ✅ +19.4% |
Provisions more than doubling year-on-year looks alarming in isolation, but the year-ago quarter (Q2 FY2024) had an unusually light Rs. 583 crore provisioning quarter - this quarter's Rs. 1,233 crore is a more normal run-rate relative to the Rs. 1,050-1,332 crore range seen in the two quarters immediately preceding it, and asset-quality ratios themselves improved (see Key Operational Metrics below), so this isn't a credit-cost deterioration signal.
Key Operational Metrics
- CASA ratio: 38.9% average, its lowest level in this site's coverage, down from 40.8% a year earlier and roughly flat with 39.6% the prior quarter - see A New Low for the Margin above.
- Net interest margin: 4.27%, its lowest reading yet, down from 4.53% a year earlier and 4.36% the prior quarter ⚠️.
- Cost of deposits: 4.88%, up from 4.53% a year earlier.
- Gross NPA» ratio: 1.97% at quarter-end vs. 2.15% the prior quarter ✅ - a genuine improvement.
- Net NPA ratio: 0.42% vs. 0.43% the prior quarter and 0.48% a year earlier ✅.
- Net additions to gross NPAs: Rs. 1,754 crore, down from Rs. 2,624 crore the prior quarter ✅.
- Provisioning coverage ratio» on NPAs: 78.5%, down from 79.7% the prior quarter.
- Domestic loans: +15.7% year-on-year, +4.6% sequentially; retail loans +14.2% year-on-year (decelerating from +17.1% the prior quarter); business banking +30.0%.
- Total deposits (period-end): +15.7% year-on-year, +5.0% sequentially - deposit growth now essentially matching loan growth, unlike the lagging pattern seen in the prior two quarters.
- Capital adequacy (standalone): Total capital adequacy ratio 16.66%, CET-1» 15.96% (including H1 FY2025 profits).
- Cost-to-income ratio: 38.6% vs. 40.9% a year earlier ✅ - the best reading in this site's coverage so far.
- Standalone return on equity (annualised): 18.1% vs. 19.1% a year earlier ⚠️.
- Return on assets (annualised): 2.39% vs. 2.41% a year earlier - essentially flat.
No unusual seasonality applies specifically to Q2 (July-September) in the bank's own prior disclosures beyond the general observation that H1 (April-September) tends to run at a more moderate credit-cost pace than H2, which the lighter provisioning quarters in this half are broadly consistent with.
Four Core Segments
Retail Banking
Segment profit before tax was Rs. 5,556 crore, up from Rs. 4,895 crore a year earlier (+13.5%) and up sharply from Rs. 4,239 crore the prior quarter - a recovery in segment profit even as loan growth within the segment decelerated, suggesting the segment's per-loan profitability improved rather than its volume.
Wholesale Banking
Segment PBT was Rs. 5,198 crore, up from Rs. 4,670 crore a year earlier (+11.3%) but down slightly from Rs. 4,912 crore the prior quarter - steady, if unspectacular, growth continuing the pattern of Wholesale as a reliable profit contributor.
Treasury
Segment PBT was Rs. 4,603 crore, up from Rs. 3,967 crore a year earlier but down from Rs. 5,474 crore the prior quarter - Treasury's contribution remains volatile quarter to quarter, consistent with every prior post's observation about this segment.
Others
The Others segment contributed Rs. 133 crore, up from Rs. 114 crore a year earlier - the smallest segment, as usual.
Which Segment Is Actually Carrying the Business
Retail Banking's segment profit recovered strongly this quarter even as its own loan growth slowed - the segment is extracting more profit per unit of growth, likely reflecting the fee-income and cost-efficiency gains flagged above rather than a change in the underlying margin dynamic. This is worth tracking closely alongside the retail loan deceleration: if segment profit keeps growing while volume growth keeps slowing, that's a maturing, higher-margin retail book; if segment profit growth reverses too, that would confirm the deceleration is a genuine demand or competitive problem rather than a one-quarter dip.
Beyond the Usual
The contingency buffer stayed frozen for a sixth straight quarter, still with no analyst questions
The Rs. 13,100 crore discretionary contingency buffer remained exactly unchanged at September 30, 2024 - now unchanged since the quarter ended March 2023, per management's own explicit confirmation on a later call (see the 2024-12 post for the direct quote). This quarter's transcript again contains no analyst question on the buffer, continuing the silence flagged in the two prior posts. The buffer's proportion of total advances has now shrunk to roughly 1.0% as the loan book keeps growing around a fixed reserve.
Business banking's redefinition this quarter makes some of its own trend comparisons noisier
Starting this quarter, the bank redefined "business banking" to comprise all borrowers with turnover up to Rs. 75 crore, folding in the SME, mid-corporate, rural business credit, and dealer-funding portfolios that were previously reported separately or grouped under other headings. This is a genuine disclosure change, not a restatement of historical results, but it means the 30.0% year-on-year growth figure for "business banking" this quarter isn't strictly comparable to the narrower business-banking figures cited in the three prior posts on this site - a reader comparing across posts should treat the pre- and post-redefinition business-banking growth rates as two related but distinct series, not one continuous one.
The regulatory large-exposure classification continues to nudge up NBFC/HFC lending disclosure, without a change in underlying appetite
Total outstanding loans to non-banking financial companies (NBFCs) and housing finance companies (HFCs) stayed in the same broad range as prior quarters, with the bank's own commentary continuing to attribute modest quarter-to-quarter moves in this figure to regulatory large-exposure classification thresholds rather than a deliberate shift in lending strategy - consistent with the explanation given in the 2022-12 post.
Target Valuation Range
Modestly expensive at a ~3.46x price-to-book», above a justified 2.7x-3.5x sustainable-P/B band even as return on equity slipped to 18.1% — the multiple has now expanded for three consecutive quarters covered on this site while ROE has moved in the opposite direction, the widest gap yet between price and profitability trend.
ICICI Bank's shares closed at Rs. 1,273.00 on the National Stock Exchange on September 30, 2024 - the actual nominal price quoted that day, with no stock split or bonus issue since 2014/2017 respectively affecting this figure. Over the two years ending this quarter, the shares rose from roughly Rs. 862 (September 2022) to Rs. 1,273 - a cumulative gain of about 48%, a steady appreciation rather than a sharp single move, so it's folded into this valuation section rather than given its own.
| Market cap → book value (per-share basis) | Q2 FY2025 |
|---|---|
| Share price (period-end) | Rs. 1,273.00 |
| Book value per share | Rs. 368.3 |
| P/B» | ~3.46x |
| Weighted-average annualised EPS | Rs. 66.2 |
| Trailing-annualised P/E» | ~19.2x |
| Standalone ROE (annualised) | 18.1% |
| Sustainable-P/B check | Value |
|---|---|
| Standalone ROE (annualised) | 18.1% |
| Cost of equity (assumed) | 13-14% |
| Terminal growth (assumed) | mid-single digits |
| Justified P/B range | ~2.7x-3.5x |
| Actual P/B | ~3.46x |
| Trailing comparison | Q1 FY2025 (2024-06) | Q2 FY2025 (2024-09) |
|---|---|---|
| P/B | ~3.32x | ~3.46x |
| Trailing P/E | ~19.0x | ~19.2x |
| Standalone ROE (annualised) | 18.0% | 18.1% |
For the first time in this site's coverage, the actual P/B moved outside the top of the justified sustainable-P/B band - a genuine, if modest, valuation-stretch signal rather than a fairly-valued reading. The peer-multiple/sustainable-P/B check above is the honest lens here; a full DCF still isn't included given the coverage gaps between the quarters this site has published so far, though the trailing comparison across four consecutive quarters (2024-03 through 2024-09) is now the longest unbroken run this site has tracked for the bank.
ICICI Bank Limited's October 26, 2024 financial results for the quarter ended September 30, 2024 (Q2-2025), reviewed by joint statutory auditors, its Q2-2025 investor presentation, and its October 26, 2024 earnings conference call transcript.