LKP Securities has reaffirmed a “BUY” rating on ICICI Bank with a 12-month price target of Rs 1,638, citing robust loan growth, strong asset quality, and resilient earnings despite near-term margin compression. In its Q4 FY25 result update, LKP emphasized ICICI Bank’s leadership in profitability, digital expansion, and sound credit underwriting as key drivers behind its optimistic outlook. Although the repo rate cycle could impact near-term margins, the bank’s structural growth story remains intact, with expectations of a 15% CAGR in loan advances through FY27.

Strong Quarter Powered by Operational Efficiencies

In Q4 FY25, ICICI Bank reported a net interest income (NII) of Rs 212 billion, up 11% year-on-year and 4% quarter-on-quarter. The NIM remained flat at 4.4% YoY but improved sequentially by 16 bps due to favorable day count effects and tax-related interest accruals. A 17.5% YoY jump in pre-provision operating profit (Rs 177 billion) underscored improved productivity and cost containment. The cost-to-income ratio dropped by 130 bps YoY to 37.9%, reflecting increased efficiency in branch operations and rising fee-based income.

Retail and Business Banking Fuel Advance Growth

The bank posted a 13.3% YoY increase in overall loan advances, reaching Rs 13.4 trillion. Retail loans grew 8.9% YoY despite a deliberate slowdown in unsecured personal lending. Mortgages expanded 11%, and vehicle loans grew modestly at 4.2%. Business banking surged by 33.7%, while corporate loans saw a healthy 11.9% growth. On the liability side, deposits grew 14% YoY, with current and savings accounts rising 20.3% and 9.6% respectively. Term deposits also rose 14.6%, maintaining a CASA ratio of 41.8%.

Asset Quality on Firm Ground

ICICI Bank continues to impress on asset quality metrics. Gross NPAs declined to 1.67% and net NPAs to 0.39%, aided by reduced slippages and improved recoveries. The bank maintained a healthy provision coverage ratio (PCR) of 76.2%, with contingency provisions of Rs 131 billion—equal to nearly 1% of the total loan book. Recoveries and upgrades during the quarter totaled Rs 38.17 billion, significantly reducing stress in the retail and business portfolios.

Branch Network Expansion Enhances Distribution

ICICI Bank added 241 new branches in Q4 FY25, taking its total count to 6,983 branches. The bank aims to maintain a similar expansion rate in FY26. This physical footprint complements its strong digital strategy and provides deeper penetration across India. LKP views the growing branch network as an important enabler for retail loan growth and improved customer engagement, especially in tier-2 and tier-3 cities.

Profitability and Return Metrics Remain Robust

The bank reported Rs 126 billion in net profits for Q4 FY25, an 18% YoY increase despite elevated provisioning levels. Return ratios remain healthy with RoA at 2.52% and RoE at 18.2%. For FY25, EPS stood at Rs 66.3, up from Rs 58.2 in FY24. Looking forward, LKP projects EPS to grow to Rs 76.6 in FY26 and Rs 85.8 in FY27, driven by stronger loan book yields and stable credit costs.

Valuation Still Attractive Against Historical Averages

ICICI Bank currently trades at 2.6x FY27E adjusted book value (ABV), below its three-year average of 2.8x. The valuation remains compelling given the bank’s superior RoA and RoE profile compared to peers. The stock’s P/E ratio for FY26E stands at 18.4x and is expected to decline to 16.4x by FY27E as earnings growth continues to outpace price appreciation.

Key Catalysts and Strategic Outlook

LKP sees the following as forward-looking drivers:

• Loan growth CAGR of 15% from FY25 to FY27 fueled by digital innovation and network expansion.
• Improving margin profile as repo rate stabilizes and re-pricing gaps normalize.
• Increased exposure to higher-yielding retail assets, leading to enhanced NIMs over the medium term.
• Digital leadership through ICICI Stack and end-to-end online offerings that improve operational scalability.

The combination of prudent risk management, sound capital allocation, and aggressive distribution places ICICI Bank in a strong position to outperform the broader financial sector.

Target and Recommendation

LKP maintains a BUY rating on ICICI Bank, with a 12-month SOTP-based target of Rs 1,638. This implies a potential upside of 16% from the current market price of Rs 1,410. The target includes Rs 1,454 for the core banking business and Rs 185 attributed to its subsidiaries and strategic investments.

Long Term View: Positioned for Sustainable Growth

ICICI Bank continues to reinforce its leadership credentials in Indian banking. While near-term margin compression due to interest rate shifts may pose challenges, the bank’s long-term trajectory remains unshaken. Its expanding footprint, high capital adequacy, improving credit quality, and strong digital ecosystem position it well for sustainable growth in a structurally positive macro environment. With a compelling valuation and earnings momentum, ICICI Bank remains a top-tier pick among Indian large-cap banks for institutional and retail investors alike.