ICICI Bank posted a second-quarter profit of INR 148.4 billion, driven by 30% loan growth and improved asset quality. Following these results, brokerage Motilal Oswal has set a price target of INR 1,750, citing strong operational efficiency. Investors are now closely monitoring the bank’s net interest margins, which face some pressure due to rising deposit costs despite robust underlying loan performance.
ICICI Bank reported a profit after tax of INR 148.4 billion for the second quarter of the 2027 fiscal year, a result that aligned with market expectations. Following the announcement, brokerage firm Motilal Oswal has maintained a positive outlook on the stock, setting a price target of INR 1,750. This target is based on the bank's operational performance and an estimated valuation of 2.5 times its book value for March 2028.
The bank has maintained a strong growth path, with its total loan book expanding by 30% compared to the same period last year. A key positive highlighted in the results is the improvement in asset quality. New bad loans, or fresh slippages, declined by 13% quarter-on-quarter to INR 48.3 billion. This suggests that the bank is managing its loan risks effectively while continuing to grow its credit portfolio.
Despite the strong loan growth, the bank faces pressure on its net interest margins (NIM), which show the difference between what a bank earns on loans and what it pays for deposits. The NIM for the quarter stood at 4.18%, marking an 18-basis point decline from the previous quarter. This drop reflects the broader challenge faced by many large Indian banks, where the cost of attracting new deposits is increasing. Specifically, the bank is navigating the impact of higher-cost foreign currency deposits, known as FCNR(B) deposits.
Analysts at Motilal Oswal believe that these margins are likely to stabilize as the cost impact of these deposits settles in the coming quarters. The bank remains efficient, maintaining a return on assets at approximately 2.3%. Looking ahead, the brokerage expects the bank to deliver a return on equity of 17.6% for the next fiscal year, assuming it continues to manage its provisioning costs effectively.
For investors, the most important factor to track in the coming months will be the trend in net interest margins and the bank’s ability to attract low-cost deposits. As credit demand remains high, the bank's ability to balance rapid loan growth with manageable deposit costs will be crucial for maintaining profitability in future quarters.