ICICI Bank’s December-quarter profit took a hit after the Reserve Bank of India directed the lender to make a one-time standard asset provision of Rs 1,283 crore on its agricultural priority sector loan book, dragging net profit down 4% year-on-year to Rs 11,317 crore and below Bloomberg estimates of Rs 12,392 crore.
Regulatory Adjustments
In the notes to its financial results, the bank said that following an annual supervisory review, the RBI found certain agricultural credit facilities not fully compliant with regulatory requirements for classification as agricultural priority sector lending. As a result, the bank was asked to create a standard asset provision on this portfolio. Management said the overall agricultural priority sector loan book is in the range of Rs 20,000–25,000 crore.
“This additional standard asset provision will continue until the loans ore repaid or renewed in conformity with the Priority sector classification guidelines,” the bank said. During the post-earnings conference call, management clarified that the loans were directly originated by ICICI Bank.
Provisions and contingencies more than doubled year-on-year to Rs 2,555.58 crore during the quarter. As on December 31, the bank continued to hold contingency provisions of Rs 13,100 crore, with a provisioning coverage ratio of 75.4%. During the quarter, an amount of Rs 145 crore was also charged to the profit and loss account based on certain estimates and assumptions following the issuance of the new Labour Codes.
The net interest income (NII) of the bank was up 7.7% on year to Rs 21,932 crore. This was also lower than the Bloomberg estimate of Rs 22,212 crore. The net interest margin was unchanged on quarter for the reporting quarter at 4.3%. The cost of funds stood at 4.67% in the reporting quarter, lower than 4.78% reported a quarter ago. Cost of deposits too declined to 4.55% from 4.64% a quarter ago.
In terms of business growth, the growth in deposits lagged the growth in advances. As on December 31, bank deposits were up 9.2% on year to Rs 16.6 lakh crore while total advances rose 11.5% on year to Rs 14.6 lakh crore as on December 31.
Within total advances, growth in the business banking book rose 22.8% on year, followed by the retail and the domestic corporate segments which grew by 7.2% and 5.6% on year, respectively. From the overall retail book, mortgages and vehicle loans grew by 11.1% and 2.2% respectively, while the bank slowed growth in the credit card segment during the quarter.
Within total deposits, term deposits rose 9.6% on year and the current account and savings account (CASA) deposits rose 8.4% on year. The share of CASA deposits stood at 40.2% as on December 31, which is lower than 40.85% seen a quarter ago.
Core Performance
Asset quality ratios saw a decline on a year-on-year as well as on a sequential basis. The gross non-performing asset ratio (NPA) ratio stood at 1.53% as on December 31, down 5 basis points on quarter. Fresh slippages inched up to Rs 5,356 crore, as against Rs 5,034 crore a quarter ago. However, on a year-on-year basis, the slippage improved.
Separately, the board approved the re-appointment of Sandeep Bakhshi as managing director and CEO for a further period of two years from October 4, 2026 to October 3, 2028, and Ajay Kumar Gupta as executive director till November 26, 2028. Both appointments are subject to approvals from the Reserve Bank of India and the bank’s shareholders.