ICICI Bank Q3 profit slips 4% as provisions rise; asset quality improves – should you buy?

Mumbai | January 19

ICICI Bank reported a 4% year-on-year decline in standalone net profit for the December quarter, weighed down by a sharp rise in provisions, even as net interest income grew and asset quality continued to improve.

The private lender posted a net profit of ₹11,318 crore in Q3 FY26, compared with ₹11,792 crore a year earlier. The bank said the quarterly performance was largely in line with expectations, barring the higher standard asset provisions made following directions from the Reserve Bank of India’s supervisory review.

Core income steady, margins stable

Net interest income rose 7.7% year-on-year to ₹21,932 crore, while net interest margin stood at 4.30%, unchanged sequentially. Core operating profit increased 6% year-on-year to ₹17,513 crore, supported by steady loan growth and fee income. 

Provisions and treasury losses weigh

Provisions (excluding tax) more than doubled to ₹2,556 crore, including a one-time standard asset provision of ₹1,283 crore linked to priority sector lending classification. Operating expenses rose 13.2% to ₹11,944 crore, while treasury operations recorded a loss of ₹157 crore, compared with a gain in the year-ago quarter.

Asset quality improves, loan growth steady

Asset quality continued to improve, with the gross NPA ratio declining to 1.53%, from 1.58% in the previous quarter and 1.96% a year earlier. The net NPA ratio eased to 0.37%, compared with 0.39% quarter-on-quarter.

The domestic loan book grew 11.5% year-on-year to ₹14.31 lakh crore, led by corporate lending, mortgages and business banking.

Capital buffers remained strong, with a capital adequacy ratio of 17.34% and CET-1 ratio of 16.46%.

Key management commentary (Q3 concall highlights)

• Loan growth improved sequentially, led by corporate, mortgages and business banking; personal loan growth is expected to pick up gradually.
• NIMs are expected to remain range-bound in the near term, with some pressure from loan mix and deployment of surplus liquidity.
• The bank clarified that the ₹12.8 billion PSL-related provision is a one-time regulatory impact, with no change in asset classification.
• Liquidity coverage ratio stood at 126 percent, and management does not see a material impact from recent RBI liquidity guidelines. 

PL Capital View

PL Capital maintains a ‘BUY’ rating on ICICI Bank with a target price of ₹1,800, citing improving loan growth momentum, stable margins over the medium term and strong asset quality metrics.

According to PL Capital, the Q3 performance was impacted by one-time provisioning related to priority sector lending, while core fundamentals remain intact. The brokerage expects loan growth to accelerate, led by corporate, business banking and mortgages, and sees industry-leading core RoA of ~2.2 percent by FY28.

The extension of MD & CEO Sandeep Bakshi’s term till September 2028 is also seen as a key positive, reducing management continuity risk.

For the full PL Capital Research Report, click here.

ICICI Bank share price
ICICI Bank shares fell over 2.7% on the NSE, as investors reacted to the Q3 earnings and management commentary.

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