ICICI Bank Q4 Forecast: Strong Loan Growth Faces NIM Pressure Impacting Earnings

ICICI Bank Sees Share Price Surge Amid Fundraising Plans

On Monday, ICICI Bank’s share price experienced a notable increase of 3%, following the announcement that the bank’s board will discuss plans for fundraising through debt instruments at its upcoming meeting on April 19. This positive momentum reflects the bank’s robust loan and deposit growth, which is expected to bolster its overall performance in the fourth quarter of the last financial year. However, analysts caution that margin pressure could impact earnings.

Strong Growth Expected in Q4 FY25

Analysts predict that ICICI Bank will witness a 10% year-on-year increase in pre-provision operating profit (PPoP). This growth is anticipated despite a slowdown in net interest income (NII) due to recent policy rate cuts. According to Kotak Institutional Equities, loan growth is projected to reach 15% year-on-year, with all segments, particularly Micro, Small, and Medium Enterprises (MSMEs), contributing significantly.

Q4 FY25 Forecast Highlights:

Net Profit: Expected to rise by 8%, totaling ₹11,669 crore.
Net Interest Income: Anticipated to increase by nearly 9% to ₹20,722 crore.
Net Interest Margin (NIM): Forecasted to narrow by 13 basis points year-on-year to 4.27%.

Loan and Deposit Growth Trends

Brokerages estimate that ICICI Bank’s loan growth will range from 13.5% to 15% year-on-year, supported by widespread traction across retail, MSME, and corporate sectors. On a quarterly basis, loan book expansion is expected between 2.3% and 3.5%.

In terms of deposit growth, analysts project it will surpass loan growth, driven by strong term-deposit mobilization, with a year-on-year growth estimate of 13.6%. However, many foresee some pressure on NIM due to the recent repo rate cuts and the lag in deposit repricing. Kotak Institutional Equities anticipates a NIM contraction of 5-10 basis points, bringing it down to 4.2%.

Market Outlook and Asset Quality Improvement

While the NII growth may be slightly lower than the average loan growth because the decline in advance yields is outpacing deposit costs, analysts predict improvements in asset quality. According to reports from Yes Securities, slippages are expected to moderate, contributing to a decline in the non-performing asset (NPA) ratio and credit costs.

Estimated Slippages: Projected at 2%, roughly ₹6,600 crore.
Provisions: Anticipated to increase quarterly, due to a low base from the previous December quarter.

Despite strong operational performance, ICICI Bank’s shares currently trade at a discount compared to HDFC Bank. Analysts from Kotak Institutional Equities suggest that significant outperformance in ICICI Bank’s shares may not occur in the near term.

Management Insights and Future Guidance

As ICICI Bank prepares for its board meeting, all eyes will be on the management’s commentary regarding the trajectory of NIM following recent rate cuts, deposit adjustments, slippage outlook, provisions, and loan growth guidance.

Overall, Deven Choksey Research anticipates an improvement in the cost-to-income ratio, which may enhance profitability. With a disciplined approach, ICICI Bank looks poised for a promising future, although challenges remain on the horizon.

For more updates on ICICI Bank’s financial strategies and market performance, stay tuned.