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Fundamental View
AS OF 18 Dec 2024ICICI Bank is one of the leading private banks in India and has a good diversified business model, with well regarded life and general insurance subsidiaries.
Under its previous CEO, the bank suffered setbacks from sizeable bad debt problems in FY17/18, but the situation has since stabilised following a leadership change and the bank has done well ever since.
The bank’s Baa3(sta)/BBB-(pos)/ BB+(sta) ratings make it a cross-over credit but we assess fallen angel risk to be low.
Business Description
AS OF 18 Dec 2024- The original Industrial Credit and Investment Corporation of India (ICICI) was established in 1955 by the World Bank, the Government of India and representatives of Indian industry as a financial institution to provide Indian businesses with medium and long-term project financing.
- In 1994, ICICI established a commercial banking subsidiary, ICICI Bank as India's financial sector opened up, and in 2002 ICICI merged with ICICI Bank, keeping the latter's name.
- Retail now accounts for 53% of its loan book, corporates are at 20%, while rural and business banking & SMEs are at 6% and 18% respectively, and overseas (which is being de-emphasised) consists of just 3% at F1H25.
- The bank has well regarded life insurance (ICICI Prudential) and general insurance (ICICI Lombard) businesses.
Risk & Catalysts
AS OF 18 Dec 2024The Indian banks are moderating their loan growth to minimize the impact of the tight system liquidity environment on NIMs and returns, and as the RBI has guided banks to align their loan and deposit growth. ICICI however has continued to deliver both relatively strong loan and deposit growth momentum, while maintaining its leading LDR and profitability, in testament to its strong franchise.
We are cautious about Indian unsecured retail given a stretched urban middle and lower-middle class consumer with high inflation and interest costs, and economic activity in India has been slower than anticipated. ICICI’s earlier prudence towards the segment than peers however is keeping asset quality well controlled. We are though watchful of the MSME and business banking segments where growth has been brisk.
Leadership and governance issues under the previous CEO Ms. Chanda Kochhar have been dealt with well, since her replacement in Oct-18.
Key Metric
AS OF 18 Dec 2024| INR bn | FY21 | FY22 | FY23 | FY24 | 1H25 |
|---|---|---|---|---|---|
| NIM | 3.69% | 3.96% | 4.48% | 4.53% | 4.31% |
| ROAA | 1.39% | 1.77% | 2.13% | 2.37% | 2.37% |
| ROAE | 12.3% | 14.7% | 17.2% | 18.7% | 18.3% |
| Equity/Assets | 12.0% | 12.1% | 12.6% | 12.7% | 13.0% |
| CET1 Ratio | 16.7% | 17.3% | 16.9% | 15.4% | 14.4% |
| Gross NPA Ratio | 4.96% | 3.60% | 2.81% | 2.16% | 1.97% |
| Provisions/Loans | 2.05% | 0.97% | 0.65% | 0.30% | 0.38% |
| PPP ROA | 3.13% | 2.97% | 3.28% | 3.36% | 3.40% |
CreditSight View Comment
AS OF 18 Dec 2024ICICI Bank is a preferred name among the Indian FIs we cover. We like the bank’s robust capital and loan loss buffers, strong asset quality, as well as peer leading margins, profitability and liquidity position. Under its previous CEO, the bank suffered setbacks from sizable bad debt problems in FY17/18 but the situation has since stabilised following a leadership change. The bank has emerged stronger from a capital, asset quality and earnings perspective, as it de-risked its book, and took pro-active actions to protect its capital by raising equity and selling small stakes in its well-regarded insurance subsidiaries to raise funds and set aside more general provisions. ICICI last issued a $ bond in 2017.
Recommendation Reviewed: December 18, 2024
Recommendation Changed: December 07, 2020
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