ICICI Bank’s Q3FY26 performance delivered steady loan growth, stable margins, and resilient asset quality, but profitability took a visible hit due to a sharp spike in provisions following regulatory directives. While the core operating engine of the bank remains intact—supported by consistent deposit traction, controlled funding costs, and improving balance sheet strength—earnings growth moderated in the near term. Management maintains a risk-calibrated growth strategy, emphasizing long-term stability over short-term profit maximization. Deven Choksey Research continues to value ICICI Bank as a structurally strong franchise, reiterating an ACCUMULATE call with a target price of Rs 1,559, reflecting confidence in normalized profitability over the medium term.

Research House View: Deven Choksey Maintains Accumulate Rating

Deven Choksey Research has reiterated its ACCUMULATE recommendation on ICICI Bank following the lender’s Q3FY26 results. The brokerage has set a 12-month target price of Rs 1,559, implying an upside of nearly 13% from the previous closing price of Rs 1,381. The valuation is anchored in a sum-of-the-parts (SOTP) framework, reflecting both the bank’s core standalone operations and the embedded value of its subsidiaries.

Recommendation: ACCUMULATE
Target Price: Rs 1,559
Current Market Price: Rs 1,381

Quarterly Snapshot: Stable Banking Metrics, Earnings Miss Expectations

ICICI Bank reported net interest income (NII) of Rs 2,19,322 crore, marking a 7.7% year-on-year growth and a modest 1.9% sequential increase, aided primarily by lower interest expenses. However, the NII figure fell short of Deven Choksey’s expectations, reflecting softer-than-anticipated income traction despite margin stability.

Net interest margin (NIM) remained steady at 4.30%, flat sequentially and marginally higher on a yearly basis, underscoring the bank’s ability to defend margins in a competitive funding environment.

Total income rose 6.8% year-on-year to Rs 2,93,004 crore, while non-interest income grew 4.2% YoY but declined sequentially, indicating muted momentum in fee-based revenue during the quarter.

Provision Shock Drives Profit Decline

The headline drag on profitability stemmed from a sharp rise in provisions, which surged to Rs 25,556 crore, reflecting a 179.6% quarter-on-quarter increase. This spike was largely attributable to an RBI-directed additional standard asset provision of Rs 12,830 crore, linked to certain agricultural priority sector loans that required compliance alignment.

As a result:

Profit before tax (PBT) declined 9.7% QoQ to Rs 1,48,004 crore

Net profit fell 8.4% QoQ and 4.0% YoY to Rs 1,13,179 crore

Return on assets (RoA) moderated to 2.11%, down from 2.33% in Q2FY26

Management clarified that, excluding the RBI-mandated provisioning, profitability metrics would have remained largely stable, with RoA closer to historical levels.

Loan Growth Remains Resilient Across Key Segments

Despite earnings pressure, ICICI Bank’s balance sheet expansion remained robust. Advances grew 11.5% year-on-year and 4.1% sequentially to Rs 14,66,153 crore, broadly in line with estimates.

Segment-wise growth highlights:

Retail loans: +7.2% YoY

Business banking: +22.8% YoY

Domestic corporate loans: +5.6% YoY

Rural loans: +4.9% YoY

Mortgage lending posted double-digit growth, while credit card balances declined sequentially due to seasonal repayment behavior following festive spending in the previous quarter.

Deposit Momentum Healthy, CASA Ratio Moderates

Deposits rose 9.2% YoY and 2.9% QoQ to Rs 16,56,109 crore, reflecting steady customer acquisition and franchise strength. CASA deposits increased 8.4% YoY, though the CASA ratio eased to 40.2%, down sequentially due to higher term deposit mobilization.

Cost of deposits improved to 4.55%, supporting margin stability even as competitive intensity in deposit markets remained elevated.

Asset Quality Strengthens Despite Higher Provisions

ICICI Bank’s asset quality metrics continued to improve, reinforcing confidence in its underwriting discipline.

Gross NPA ratio: 1.5% (down from 1.6% QoQ)

Net NPA ratio: 0.37%

Provisioning coverage ratio (PCR): 75.4%

The bank also maintained contingency provisions of Rs 1.31 trillion, adding an additional buffer against future credit shocks.

Cost Pressures Persist, Operating Leverage Key Monitorable

Operating expenses rose 13.2% YoY, driven by employee costs and compliance-related provisions linked to new labour codes. Consequently, the cost-to-income ratio increased to 40.8%, highlighting the need for operating leverage and stronger fee income growth to support profitability recovery.

Management emphasized ongoing investments in technology and distribution, with the branch network expanding to 7,385 locations.

Valuation Framework and Investment Outlook

Deven Choksey values ICICI Bank’s standalone business at Rs 1,321 per share, based on 2.1x FY28E adjusted book value, and assigns Rs 238 per share to subsidiaries, resulting in a sum-of-the-parts valuation of Rs 1,559.

Key investment thesis:

Structural strength in loan growth and asset quality

Margin resilience supported by funding cost control

Near-term earnings volatility due to elevated provisions

Medium-term normalization once credit costs stabilize

Stock Levels and Strategy for Investors

Support Zone: Rs 1,300 – Rs 1,320
Resistance Zone: Rs 1,500 – Rs 1,520
Target Price: Rs 1,559

Long-term investors may consider accumulating the stock on declines, as ICICI Bank remains well-positioned to compound earnings once regulatory provisioning normalizes and operating leverage improves.