ICICI Bank Limited

Ladies and gentlemen, good day and welcome to ICICI Bank Limited Q3 FY26 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Bakshi, Managing Director and Chief Executive Officer of ICICI Bank. Thank you and over to you, sir.

Thank you. Good evening to all of you and welcome to the ICICI Bank Earnings Call to discuss the results for Q3 of FY2026. Joining us today on this call are Sandeep Batra, Rakesh, Ajay, Anandya and Abhinay. At ICSA Bank, our strategic focus continues to be on growing profit before tax, excluding treasury, through the 360-degree customer-centric approach and by serving opportunities across ecosystems and micro-markets. We continue to operate within the framework of our values to strengthen our franchise. Maintaining high standards of governance, deepening coverage, and enhancing delivery capabilities with a focus on simplicity and operational resilience are key drivers for our risk-calibrated profitable growth. The core operating profit increased by 6% year-on-year and 2.5% quarter-on-quarter to Rs. 175.13 billion in this quarter. The total provisions during the quarter were Rs. 25.56 billion. This includes additional standard asset provision of Rs. 12.83 billion made pursuant to Reserve Bank of India's annual supervisory review, which Anandya will explain later on the call. The profit before tax excluding treasury was 149.57 billion rupees in this quarter compared to 152.89 billion rupees in Q3 of last year. The profit after tax was 113.18 billion rupees in this quarter compared to 117.92 billion rupees in Q3 of last year. Average deposits grew by 8.7% year-on-year and 1.8% sequentially. and average current and savings account deposits grew by 8.9% year-on-year and 1.5% sequentially in this quarter. The bank continued to see healthy growth in current account deposits and individual term and savings deposits. Total deposits grew by 9.2% year-on-year and 2.9% sequentially at December 31, 2025. The bank's average LCR for the quarter was about 126%. The domestic loan portfolio grew by 11.5% year-on-year and 4% sequentially at December 31, 2025, compared to 10.6% and 3.3% at September 30, 2025. The retail loan portfolio grew by 7.2% year-on-year and 1.9% sequentially. Including non-fund-based outstanding, the retail portfolio was 42.2% of the total portfolio. The rural portfolio grew by 4.9% year-on-year and 7.2% sequentially. The business banking portfolio grew by 22.8% year-on-year and 4.7% sequentially. The domestic corporate portfolio grew by 5.6% year-on-year and 6.5% sequentially. The overall loan portfolio including the international branches portfolio grew by 11.5% year-on-year and 4.1% sequentially at December 31, 2025. The overseas loan portfolio was 2.4% of the overall loan book at December 31, 2025. The net NPA ratio was 0.37% at December 31, 2025, compared to 0.39% at September 30, 2025, and 0.42% at December 31, 2024. During the quarter, there were net additions of 20.74 billion rupees to gross NPAs, excluding write-offs and sales. The provisioning coverage ratio on non-performing loans was 75.4% at December 31, 2025. In addition, the bank continues to hold contingency provisions of 131 billion rupees, or about 0.9% of total advances at December 31, 2025. The capital position of the bank continued to be strong with a CET1 ratio of 16.46%, and total capital adequacy ratio of 17.34% at December 31, 2025, including profits for nine months, 2026. Looking ahead, we see many opportunities to drive risk-calibrated profitable growth and grow market shares across key segments. We remain focused on maintaining a strong balance sheet, prudent provisioning, and healthy levels of capital while delivering sustainable and predictable returns to our shareholders. I now hand the call over to Anand here.

Thank you, Sandeep. Let me first talk about the additional standard asset provision. Following its annual supervisory review, RBI has directed the bank to make a standard asset provision of 12.83 billion rupees in respect of a portfolio of agricultural priority sector credit facilities wherein the terms of the facilities were found to be not fully compliant with the regulatory requirements for classification as agricultural priority sector lending. There is no change in asset classification or in the terms and conditions applicable to the borrowers or in the repayment behavior of borrowers as per these terms. The bank has been originating this portfolio over some years and will work to bring it in conformity with regulatory expectations. This additional standard asset provision will continue until the loans are repaid or renewed in conformity with the PSL classification guidelines. I will now talk about loan growth, credit quality, P&L details and the performance of subsidiaries. Sandeep covered the loan growth across various segments. Coming to the growth across retail products, the mortgage portfolio grew by 11.1% year on year and 3.2% sequentially. Auto loans grew by 0.7% year on year and 0.9% sequentially. The commercial vehicles and equipment portfolio grew by 7.9% year on year and 3.2% sequentially. Personal loans grew by 2.4% year on year and 1.7% sequentially. The credit card portfolio declined by 3.5% year on year and 6.7% sequentially. During the quarter, we saw improved growth trends across the mortgage, rural and corporate portfolios. The sequential decline in the credit card portfolio was due to high festive spends towards the end of the previous quarter, which had resulted in high sequential book growth in that quarter and saw repayments in the current quarter. Within the corporate portfolio, the total outstanding to NVFCs and HSCs was Rs. 791.18 billion at December 31, 2025, compared to Rs. 794.33 billion at September 30, 2025, The total outstanding loans to NBFCs and HFCs were about 4.3% of our advances at December 31, 2025. The builder portfolio including construction finance, lease rental discounting, term loans and working capital was 680.83 billion rupees at December 31, 2025 compared to 635.83 billion rupees at September 30, 2025. The builder loan portfolio was 4.3% of our total loan portfolio. Our portfolio largely comprises well-established builders and this is also reflected in the sequential increase in the portfolio. About 1.1% of the builder portfolio at December 31, 2025 was either rated BB and below internally or was classified as non-performing. Moving on to credit quality, the gross NPA additions were 53.56 billion rupees in the current quarter compared to 60.85 billion rupees in Q3 of last year. Recoveries and upgrades from gross NPAs excluding write-offs and sale were 32.82 billion rupees in the current quarter compared to 33.92 billion rupees in Q3 of last year. The net additions to gross NPAs were 20.74 billion rupees in the current quarter compared to 26.93 billion rupees in Q3 of last year. The gross NPA additions from the retail and rural portfolios were 42.77 billion rupees in the current quarter compared to 53.04 billion rupees in Q3 of last year. There were gross NPA additions of about 7.36 billion rupees from the Kisan credit card portfolio in the current quarter compared to 7.14 billion rupees in Q3 of last year. We typically see higher NP additions from the Kisan credit card portfolio in the first and third quarter of a fiscal year. Recoveries and upgrades from the retail and rural portfolios were 25.39 billion rupees in the current quarter compared to 27.86 billion rupees in Q3 of last year. The net additions to gross NPAs in the retail and rural portfolios were 17.38 billion rupees in the current quarter compared to 25.18 billion rupees in Q3 of last year. The gross NPA additions from the corporate and business banking portfolios were 10.79 billion rupees in the current quarter compared to 7.81 billion rupees in Q3 of last year. Recoveries and upgrades from the corporate and business banking portfolios were 7.43 billion rupees in the current quarter, compared to 6.06 billion rupees in Q3 of last year. There were net additions to gross MPAs of 3.36 billion rupees in the current quarter in the corporate and business banking portfolios, compared to 1.75 billion rupees in Q3 of last year. The gross NPAs written off during the quarter were 20.46 billion rupees. Further, there was sale of NPAs of 1.2 billion rupees for cash in the current quarter. The non-fund-based outstanding to borrowers classified as non-performing was 22.29 billion rupees as of December 31st, 2025. The loans and non-fund-based outstanding to performing corporate borrowers rated WB and below was 33.92 billion rupees at December 31, 2025. This portfolio was about 0.2% of our advances at December 31, 2025. The total fund-based outstanding to all standard borrowers under resolution as per various guidelines was 16.66 billion rupees for about 0.1% of the total loan portfolio at December 31, 2025. At the end of December, the total provisions other than specific provisions on fund-based outstanding to borrowers classified as non-performing were 226.57 billion rupees or 1.5% of loans. This includes the contingency provisions of 131 billion rupees as well as general provision on standard assets, provisions held for non-fund-based outstanding to borrowers classified as non-performing. fund and non-fund-based outstanding to standard borrowers under resolution and the WB and below portfolio. These provisions do not include the additional standard asset provision as directed by RBI in respect of a portfolio of agricultural priority sector credit facilities. Moving on to the P&L details, net interest income increased by 7.7% year-on-year, and 1.9% sequentially to 219.32 billion rupees in this quarter. The net interest margin was 4.3% in this quarter compared to 4.3% in the previous quarter and 4.25% in Q3 of last year. The cost of deposits was 4.55% in this quarter compared to 4.64% in the previous quarter and 4.91% in Q3 of last year. The benefit of interest on tax refund was one basis point in the current quarter compared to nil in the previous quarter and one basis point in Q3 of last year. Of the total domestic loans, interest rates on about 56% of the loans are linked to the repo rate and other external benchmarks, 13% to MCLR and other older benchmarks, and the remaining 31% of loans have fixed interest rates. Non-interest income, including treasury, by 12.4% year-on-year and 2.3% sequentially to 75.25 billion rupees in Q3 of FY2026. Fee income increased by 6.3% year-on-year and 1.2% sequentially to 65.72 billion rupees in this quarter. Fees from retail, rural and business banking customers constituted about 78% of the total fees in this quarter. Dividend income from subsidies was 6.81 billion rupees at this quarter compared to 8.1 billion rupees in the previous quarter and 5.09 billion rupees in Q3 of last year. The year-on-year increase in dividend income was primarily due to the receipt of interim dividend from ICICI Securities. On cost, the bank's operating expenses increased by 13.2% year-on-year and 1.2% sequentially in this quarter. Employee expenses increased by 12.5% year-on-year and 1.8% sequentially in this quarter, including the impact of 1.45 billion rupees of provisions on an estimated basis pursuant to the new labor code. Non-employee expenses increased by 13.6% year-on-year and 0.8% sequentially in this quarter. Branch count has increased by 402 in nine months of the current year. we had 7,385 branches as of December 31st, 2025. The technology expenses were about 11% of our operating expenses in nine months of the current year. The total provisions during the quarter were 25.56 billion rupees, excluding the additional standard asset provision. The total provisions were 12.73 billion rupees or 7.3% of core operating profit and 0.36% of average advances. compared to the provisions of 12.27 billion rupees in Q3 of last year. The profit before tax excluding treasury was 149.57 billion rupees in this quarter compared to 152.89 billion rupees in Q3 of last year. There was a treasury loss of 1.57 billion rupees in Q3 of the current year as compared to a gain of 2.2 billion rupees in Q2 of the current year and gain of 3.71 billion rupees in Q3 of the previous year are primarily reflecting market movements. The tax expense was 34.82 billion rupees in this quarter compared to 38.68 billion rupees in the corresponding quarter last year. The profit after tax was 113.18 billion rupees in this quarter compared to 117.92 billion rupees in Q3 of last year. Adjusting for additional standard asset provisioning, the profit before tax excluding treasury would have increased by 6.2% year-on-year to 162.40 billion rupees. And similarly, profit after tax would have increased by 4.1% year-on-year to 122.80 billion rupees in this quarter. The return on average assets and standalone ROE would have been 2.3% and 15.5% respectively in this quarter. The consolidated profit after tax was 125.38 billion rupees in this quarter compared to 128.83 billion rupees in Q3 of last year. The details of the financial performance of key subsidies are covered in slides 33 to 36 and 55 to 60 in the investor presentation. The annualized premium equivalent of ICICI life was 68.11 billion rupees in the nine months ended December 31, 2025. as compared to 69.05 billion rupees in nine months of last year. The value of new business increased to 16.64 billion rupees in nine months ended December 31, 2025 from 15.75 billion rupees in nine months of last year. The value of new business margin was 24.4% in nine months ended December 31, 2025 compared to 22.8% in FY 2025 and in the nine months of last year. The profit after tax of ISSA Life was 9.92 billion rupees in the 9 months ended December 31, 2025 compared to 8.03 billion rupees in 9 months.