Brokerage firm Prabhudas Lilladher has increased its price target for ICICI Bank to INR 1,900, citing strong operational performance and consistent loan growth. While the bank is experiencing temporary pressure on its net interest margins, the brokerage notes that a strategic focus on deposit accumulation will support credit expansion in the future.
Brokerage firm Prabhudas Lilladher has revised its outlook on ICICI Bank, setting a new price target of INR 1,900. This update follows the bank’s recent quarterly performance, which exceeded expectations in core profit before factoring in bad loans and taxes. The firm maintained a positive view on the bank’s ability to grow its loan book faster than many of its peers in the banking sector.
Driving the positive sentiment is the bank's operational efficiency. In its latest quarterly update, the bank reported a core operating profit beat of 3.7% compared to estimates. This strength was supported by steady growth in fees and income from interest. The bank's loan book grew by 7.3% on a quarter-on-quarter basis, a pace that continues to outshine several of its competitors in the private banking space.
However, the report also addresses the challenge of margin compression. The bank saw its net interest margin—the difference between the interest income earned on loans and the interest paid on deposits—decline by 10 basis points to 4.28% sequentially. The brokerage anticipates that this pressure may continue into the third quarter of the fiscal year 2027. This is primarily due to the cost of FCNR (Foreign Currency Non-Resident) deposits, which are fixed-rate deposits that come with higher funding costs for the bank.
Despite the immediate hit to profitability margins, the research firm frames this as a calculated trade-off. By securing these deposits now, ICICI Bank is locking in funding to ensure it has enough capital to meet future credit demand. As the interest rate cycle shifts, the bank expects these margins to start recovering from the fourth quarter of the 2027 fiscal year. The brokerage anticipates that potential changes in the repo rate and more efficient use of available cash will help normalize these margins.
Reflecting the continued strength in loan expansion, the research firm has raised its core profit after tax estimates for the next two fiscal years by an average of 5%. Although the target price multiple was adjusted downward slightly to 2.6 times from 2.7 times to reflect a conservative valuation, the overall price target was lifted from the previous INR 1,850 to INR 1,900.
Investors looking at the sector should track how effectively the bank manages its deposit costs against the growth in its loan book. While the bank has maintained strong loan momentum, the ability to protect margins in a competitive funding environment remains a key monitorable. Shareholders will likely look for updates on margin recovery, asset quality, and management commentary regarding credit demand in the upcoming quarters.