ICICI Bank Ltd. Q2 FY2025 earnings call

• Strategic focus on growing profit before tax excluding treasury via 360-degree customer-centric approach and serving opportunities across ecosystems. - Revised loan presentation to reflect consolidated business banking portfolio. - Discussed loan growth across segments (retail, rural, business banking, corporate), credit quality, P&L details, digital offerings (72% of trade transactions digital in Q2 FY '25), and performance of subsidiaries (ICICI Life, ICICI General, etc.). - Enhanced technology use in operations, with focus on maintaining strong balance sheet and prudent provisioning.

Profit before tax, excluding treasury grew by 7.9% year-on-year and 5.2% quarter-on-quarter to INR 148.10 billion. Core operating profit increased by 12.1% year-on-year and 4.1% quarter-on-quarter to INR 160.43 billion. Profit after tax grew by 14.5% year-on-year and 6.2% quarter-on-quarter to INR 117.46 billion. Total deposits grew by 15.7% year-on-year and 5% sequentially at September 30, 2024. Term deposits increased by 15.9% year-on-year and 5.5% sequentially. Average deposits grew by 15.6% year-on-year and 3.6% sequentially; average current and savings account deposits grew by 10.4% year-on-year and 1.8% sequentially. Domestic loan portfolio grew by 15.7% year-on-year and 4.6% sequentially. Retail loan portfolio grew by 14.2% year-on-year and 2.9% sequentially (44.9% of total portfolio). Rural portfolio grew by 16.5% year-on-year and 1.7% sequentially. Business banking portfolio grew by 30% year-on-year and 10.7% sequentially. Domestic corporate portfolio grew by 11.8% year-on-year and 4.9% sequentially. Overall loan portfolio (including international branches) grew by 15% year-on-year and 4.4% sequentially. Net NPA ratio was 0.42% at September 30, 2024. Total provisions INR 12.33 billion or 7.7% of core operating profit and 0.38% of average advances. Provisioning coverage ratio on nonperforming loans was 78.5%. Contingency provisions INR 131 billion or about 1% of total loans. Capital position strong with CET1 ratio 15.96% and total capital adequacy ratio 16.66% at September 30, 2024.

• Focus on risk-calibrated profitable growth, continuing investments in technology, people, distribution, and brand. - Aim to deliver holistic solutions to customers and grow market share. - Expect margins to be broadly stable in H2 relative to H1 until a rate cut cycle starts.

• Evolution of global and domestic inflation, liquidity, and rate environment. - Potential stress in unsecured loans (credit cards, personal loans) though bank has taken measures to manage. - Competitive intensity in market lending affecting yields.

Q: Congratulations on a very good set of numbers. My question is just related to general asset quality. So your slippages have done very well this quarter. And you've been growing your unsecured loans though at a lower pace, but quite healthily, right? So your growth in mortgage and unsecured loans on a Q-o-Q basis is similar. And despite that, there is no sign of stress on your books while every other lender is seeing some stress or the other on unsecured loans, either in credit cards or other unsecured loans. So how do you look -- think about your book going ahead? Will that divergent trend from the sector continue? And what is it that you think you're doing right relative to others?

A: Mahrukh, first of all, I think we have also seen an increase in the delinquencies and NPL formation in unsecured loans over the last, I would say, 3 to 4 quarters, both in credit cards and in personal loans. But during this period and even prior to that, we had been taking various steps to sort of improve the way we were underwriting and sourcing this portfolio in terms of customer segments and various other -- pricing and various other filters. And therefore, as you would see on the personal loan side, the growth on a year-on-year basis has actually come off pretty significantly. Last year in the September quarter, the year-on-year growth was 40%, and this year, it is down to 17% or so. So the -- but in this portfolio, over a period of time, the slippages have gone up. I would say that in the current quarter, we have not seen them go up further on a sequential basis, but we will continue to watch. On the credit card side, I think it's a little different from personal loans because that's a very core product from a -- when you look at a bank customer relationship and sort of a high-touch products, so that's definitely a business we would want to continue to grow. But there also, over a period of time, we have taken various steps in terms of the sourcing pattern. And while we have seen again there also the delinquencies and credit costs go up, it continues to be a very profitable business and a growth business. Overall, the unsecured piece, these 2 products put together, are about 14% of the loan book. So some increase in delinquency or credit costs in these segments has contributed to the path towards some kind of normalization of credit costs. But even after that, if you look at it, we are still in the 40, 50 basis point range on an overall basis. So that's how we would manage going forward.

Q: Congratulations on a very good set of numbers. My question is just related to general asset quality. So your slippages have done very well this quarter. And you've been growing your unsecured loans though at a lower pace, but quite healthily, right? So your growth in mortgage and unsecured loans on a Q-o-Q basis is similar. And despite that, there is no sign of stress on your books while every other lender is seeing some stress or the other on unsecured loans, either in credit cards or other unsecured loans. So how do you look -- think about your book going ahead? Will that divergent trend from the sector continue? And what is it that you think you're doing right relative to others?

A: Mahrukh, first of all, I think we have also seen an increase in the delinquencies and NPL formation in unsecured loans over the last, I would say, 3 to 4 quarters, both in credit cards and in personal loans. But during this period and even prior to that, we had been taking various steps to sort of improve the way we were underwriting and sourcing this portfolio in terms of customer segments and various other -- pricing and various other filters. And therefore, as you would see on the personal loan side, the growth on a year-on-year basis has actually come off pretty significantly. Last year in the September quarter, the year-on-year growth was 40%, and this year, it is down to 17% or so. So the -- but in this portfolio, over a period of time, the slippages have gone up. I would say that in the current quarter, we have not seen them go up further on a sequential basis, but we will continue to watch. On the credit card side, I think it's a little different from personal loans because that's a very core product from a -- when you look at a bank customer relationship and sort of a high-touch products, so that's definitely a business we would want to continue to grow. But there also, over a period of time, we have taken various steps in terms of the sourcing pattern. And while we have seen again there also the delinquencies and credit costs go up, it continues to be a very profitable business and a growth business. Overall, the unsecured piece, these 2 products put together, are about 14% of the loan book. So some increase in delinquency or credit costs in these segments has contributed to the path towards some kind of normalization of credit costs. But even after that, if you look at it, we are still in the 40, 50 basis point range on an overall basis. So that's how we would manage going forward.

Q: Congratulations on a very good set of numbers. My question is just related to general asset quality. So your slippages have done very well this quarter. And you've been growing your unsecured loans though at a lower pace, but quite healthily, right? So your growth in mortgage and unsecured loans on a Q-o-Q basis is similar. And despite that, there is no sign of stress on your books while every other lender is seeing some stress or the other on unsecured loans, either in credit cards or other unsecured loans. So how do you look -- think about your book going ahead? Will that divergent trend from the sector continue? And what is it that you think you're doing right relative to others?

A: Mahrukh, first of all, I think we have also seen an increase in the delinquencies and NPL formation in unsecured loans over the last, I would say, 3 to 4 quarters, both in credit cards and in personal loans. But during this period and even prior to that, we had been taking various steps to sort of improve the way we were underwriting and sourcing this portfolio in terms of customer segments and various other -- pricing and various other filters. And therefore, as you would see on the personal loan side, the growth on a year-on-year basis has actually come off pretty significantly. Last year in the September quarter, the year-on-year growth was 40%, and this year, it is down to 17% or so. So the -- but in this portfolio, over a period of time, the slippages have gone up. I would say that in the current quarter, we have not seen them go up further on a sequential basis, but we will continue to watch. On the credit card side, I think it's a little different from personal loans because that's a very core product from a -- when you look at a bank customer relationship and sort of a high-touch products, so that's definitely a business we would want to continue to grow. But there also, over a period of time, we have taken various steps in terms of the sourcing pattern. And while we have seen again there also the delinquencies and credit costs go up, it continues to be a very profitable business and a growth business. Overall, the unsecured piece, these 2 products put together, are about 14% of the loan book. So some increase in delinquency or credit costs in these segments has contributed to the path towards some kind of normalization of credit costs. But even after that, if you look at it, we are still in the 40, 50 basis point range on an overall basis. So that's how we would manage going forward.