ICICI Bank (IBN) Q2 FY2027 results: FCNR deposits lift profit 20%, margin falls to 4.18%

ICICI Bank's fiscal 2027 second-quarter results show profit growth accelerating as roughly USD 18 billion of foreign-currency deposits expanded the balance sheet, at the cost of a lower net interest margin. The bank discussed the quarter ended September 30, 2026 on its earnings call on October 17, 2026 [1]. Earlier research on the bank focused on three questions: whether foreign-currency deposits would dilute the margin, whether operating expenses could again grow more slowly than income, and whether credit costs could stay low as lending shifted toward small businesses. This quarter the margin was diluted as anticipated, expenses grew well below income, and new bad loans fell below the prior-year level for a second straight quarter. The fiscal 2026 pattern, in which the balance sheet grew but profit lagged, reversed this quarter. That reversal depends on the expansion funded by foreign-currency deposits, and whether it holds as the margin narrows further will depend on the next two quarters.

ICICI Bank is a private-sector bank headquartered in Mumbai, India. The standalone bank reports retail banking, wholesale banking and treasury among its segments [2]. It earns most of its income from the spread between lending and deposit rates, followed by fees, and it consolidates life insurance, general insurance, asset management and securities subsidiaries [1][3].

Foreign-currency deposits expanded the balance sheet and cut the margin to 4.18%

During the quarter the bank used a Reserve Bank of India swap arrangement to raise about USD 18 billion of FCNR(B) deposits, which are foreign-currency term deposits from non-resident Indians [1]. Period-end deposits rose 27.1% year on year, or 17% excluding these deposits. Total loans rose 30% year on year, or 24.1% excluding loans made against these deposits, and overseas loans rose to 7.8% of the loan book [1].

The foreign-currency assets pulled down the overall margin. The reported net interest margin was 4.18%, compared with 4.36% in the previous quarter, or 4.28% excluding interest on an income-tax refund [1]. Management explained that the overseas book earns a margin of about 1% while the domestic book earns more than 4%. The large inflow of term deposits also lowered the share of current and savings account deposits, and the domestic margin fell from 4.36% to 4.32% [1].

The income gained from the larger balance sheet exceeded the margin loss. Net interest income was INR 253.39 billion, up 17.7% year on year, compared with year-on-year growth of about 12.7% in the previous quarter [1][4]. Management said it anticipates a further narrowing of the margin in the third quarter, a recovery from the fourth quarter, and deployment of the excess liquidity over the next two quarters. Management did not provide a margin excluding the foreign-currency deposits, so the size of the dilution cannot be verified on its own [1].

Operating expenses grew more slowly than income

Operating expenses rose 8.5% year on year in the quarter, below income growth, which the bank had not achieved in the previous quarter [1][4]. Employee costs rose 13.5% and non-employee expenses rose 5.6%. The bank added a net 48 branches in the quarter, compared with 97 in the previous quarter [1][5]. Based on the disclosed figures, net total income excluding treasury grew by about 16.4%. In the previous quarter, expenses grew 10.4%, faster than the 9.4% growth in net total income [1][4].

Profit growth accelerated as a result. Core operating profit rose 21.8% year on year, and profit after tax was INR 148.43 billion, up 20.1%. By comparison, operating profit before provisions grew only 6.3% in fiscal 2026 [1][6]. Fee income rose 20.1%, including arrangement fees on loans made against the foreign-currency deposits. Management said these fees were broadly offset by the cost of the wholesale funding raised for those loans [1].

New bad loans stayed below the prior-year level for a second quarter

Small-business and domestic corporate lending led loan growth, rising 33.8% and 30.6% year on year. The combined retail and rural portfolio grew 14.8%, and the credit card book declined 9.7% [1]. New non-performing loans were INR 48.33 billion in the quarter, compared with INR 50.34 billion a year earlier. In the previous quarter they were INR 55.52 billion, also below the INR 62.45 billion recorded a year before [1][7]. Management attributed the improvement to lower bad-loan formation in personal loans and credit cards. The corporate and small-business portfolios, however, moved to net additions of INR 1.08 billion in bad loans [1].

Reported provisions were unusually low and should not be read as a normal level. Provisions were INR 8.51 billion in the quarter, compared with INR 12.60 billion in the previous quarter, but the quarter included one relatively large corporate recovery [1][4]. Management said that, excluding one-off items and seasonality, the normalized credit cost would be about 50 basis points. An INR 12.83 billion agricultural provision required by the Reserve Bank of India remains on the books pending regulatory review [1].

Conclusion

The quarter shows ICICI Bank converting a one-off inflow of foreign-currency funding into faster loan and profit growth. The drag from expenses on profit disappeared this quarter, and bad-loan formation remained low. The cost is a lower margin, which management anticipates will narrow again in the third quarter. The common equity tier 1 ratio was 16.01%, so capital remains ample [1]. Whether this assessment holds depends on whether the margin recovers in the fourth quarter, whether expenses keep growing more slowly than income after the foreign-currency fees fade, and whether new bad loans stay below the prior-year level during the third quarter's seasonal agricultural peak. The bank's standalone financial statements for the quarter had not yet been filed, so interest expense and expense amounts remain to be checked.

Sources

[1] IBN Q2 FY2027 earnings call 2026-10-17, 2026-10-17, ICICI Bank earnings call (speech-recognition transcript), https://www.icicibank.com/about-us/investor-relations [2] IBN 6-K filed 2026-07-22 — standalone segmental results, Q1-2027, 2026-07-22, 6-K, https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001103838&type=6-K&dateb=&owner=include&count=40 [3] IBN 6-K filed 2026-07-22 — key subsidiaries, Q1-2027, 2026-07-22, 6-K, https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001103838&type=6-K&dateb=&owner=include&count=40 [4] IBN 6-K filed 2026-07-22 — standalone financial results, Q1-2027, 2026-07-22, 6-K, https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001103838&type=6-K&dateb=&owner=include&count=40 [5] IBN 6-K filed 2026-07-22 — branch network, Q1-2027, 2026-07-22, 6-K, https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001103838&type=6-K&dateb=&owner=include&count=40 [6] IBN 20-F filed 2026-07-20 — Operating profit before provisions, 2026-07-20, 20-F, https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001103838&type=20-F&dateb=&owner=include&count=40 [7] IBN 6-K filed 2026-07-22 — asset quality, Q1-2027, 2026-07-22, 6-K, https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001103838&type=6-K&dateb=&owner=include&count=40