The Quarter at the Inflow Gauge

Net interest income and slippages landed exactly on ICICI Securities' forecasts. Profit of Rs 1,045 crore nearly tripled from a year earlier and beat the brokerage's estimate by 5% on disciplined spending. Operating expenses rose only about 4% sequentially, and the quarter's profit slipped just 2.8% from the June quarter despite the margin squeeze.

The Floodgate: Where the Foreign Deposits Flowed

The defining event was a raise of FCNR(B) deposits worth roughly Rs 34,100 crore, about 10% of the June-quarter deposit base. The money arrived in late August and was not fully deployed by the September close. Management said the landed cost of these deposits was 6.85%, against 7.80% for domestic term deposits after reserve requirements, a saving of nearly 100 basis points on funding cost.

Excluding FCNR loans, credit growth still ran at about 6% sequentially, which ICICI Securities attributes to wholesale and business banking. CASA deposits rose 20% YoY and 5% QoQ, though the CASA ratio dipped to 47.6% because the FCNR inflow swelled the denominator. Fee income tied to the FCNR raise was a modest Rs 30 crore, against roughly Rs 60 crore spent raising FCNR deposits and medium-term note borrowings.

Margin Sluice: How 38 Basis Points Drained and How 22 Return

Reported margin fell 38 basis points to 5.58%. Stripping out a 6 basis-point one-off income-tax refund in the June quarter, the underlying decline was 32 basis points. Management sees margins range-bound in the near term before a quick climb to 5.80% by the March 2027 quarter, a plan that assumes one more 25 basis-point repo rate hike in FY27. Its loan book is 62% fixed-rate, 32% repo-linked and 6% MCLR-linked.

The return-on-assets damage is slight: management puts the FCNR hit at about 2 basis points, as a larger balance sheet also dilutes cost ratios. Quarterly RoA eased to 0.9% from 1.0%, with RoE at 8.5%. Average liquidity coverage was 125%, rising to 139% in September.

Operating Jaws Stay Open for a Third Quarter

ICICI Securities reads the gap as evidence of improving unit economics, and fee income grew 24% YoY. The cloud is bancassurance: new rules should erode commissions sharply, so the brokerage left FY28 profit broadly unchanged despite higher growth and margin assumptions. Management expects the banca hit to be offset by FCNR benefits, the repo hike and product changes.

Water-Quality Readings: Asset Quality Holds

Overall SMA 1+2 in the retail, rural and MSME book improved 5 basis points to 72 basis points, though the bank remains watchful of El Nino. Its wholesale book is 76% rated A+ and management reports no corporate delinquency in seven years apart from one ATM company. The bank guides that the expected-credit-loss transition hit to CET1 will be offset by credit-risk guidelines.

Catchment Map: The Funded-Asset Book

Forecast Readings and the Target

ICICI Securities raised FY27 EPS by 8% and FY28 by 2%. It cut its multiple to about 1.4 times FY28 adjusted book value from about 1.5 times to reflect a permanently smaller banca fee pool, arriving at Rs 95.

Flood-Warning Levels: Risks to Watch