ICICI Bank Q1 25/26 Earnings Call Transcript

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Provided by Quartr
July 19, 2025

Key Takeaways

  • Positive Sentiment: The bank’s profit before tax (excluding treasury) rose 11.4% YoY to INR 156.9 billion and profit after tax grew 15.5% to INR 127.7 billion in Q1 FY26.
  • Positive Sentiment: Average deposits increased 11.2% YoY (12.8% growth in total deposits) and the domestic loan portfolio grew 12% YoY, driven by a 29.7% jump in business banking loans.
  • Positive Sentiment: Asset quality remained strong with the net NPA ratio improving to 0.41%, a provisioning coverage ratio of 75.3%, and contingency provisions equal to about 1% of total advances.
  • Neutral Sentiment: The net interest margin dipped slightly to 4.34% as deposit costs fell to 4.85%, reflecting savings rate cuts and gradual loan repricing.
  • Positive Sentiment: Capital ratios stayed robust with a CET1 ratio of 16.31% and total capital adequacy of 16.97% at June 30, 2025.
AI Generated. May Contain Errors.
Earnings Conference Call
ICICI Bank Q1 25/26
00:00 / 00:00

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Operator

And gentlemen, good day and welcome to the Q1 FY 26 earnings conference call of ICICI Bank. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Bakhshi, Managing Director and Chief Executive Officer of ICICI Bank. Thank you, and over to you, sir.

Sandeep Bakhshi
Sandeep Bakhshi
Managing Director and CEO at ICICI Bank

Thank you. Good evening to all of you, and welcome to the ICICI Bank earnings call to discuss the results for Q1 of FY 2026. Joining us today on this call are Sandeep Batra, Rakesh Jha, Ajay, Anindya, and Abhishek. At ICICI Bank, our strategic focus continues to be on growing profit before tax, excluding treasury, through the 360-degree customer-centric approach and by serving opportunities across ecosystems and micro-market. We continue to operate within the framework of our values to strengthen our franchise. Maintaining high standards of governance, deepening coverage, and enhancing delivery capabilities with a focus on simplicity and operational resilience are key drivers for our risk-calibrated, profitable growth. The profit before tax, excluding treasury, grew by 11.4% year-on-year to INR 156.90 billion in this quarter. The core operating profit increased by 13.6% year-on-year to INR 175.05 billion in this quarter.

Sandeep Bakhshi
Sandeep Bakhshi
Managing Director and CEO at ICICI Bank

The profit after tax grew by 15.5% year-on-year to INR 127.68 billion in this quarter. Total deposits grew by 12.8% year-on-year and were flat sequentially at June 30, 2025. During the quarter, average deposits grew by 11.2% year-on-year and 3.1% sequentially, and average current and savings account deposits grew by 8.7% year-on-year and 3.9% sequentially. The bank's average liquidity coverage ratio for the quarter was about 128%. The domestic loan portfolio grew by 12% year-on-year and 1.5% sequentially at June 30, 2025. The retail loan portfolio grew by 6.9% year-on-year and 0.5% sequentially. Including non-fund-based outstanding, the retail portfolio was 43.2% of the total portfolio. The rural portfolio declined by 0.4% year-on-year and 1.5% sequentially. The business banking portfolio grew by 29.7% year-on-year and 3.7% sequentially. The domestic corporate portfolio grew by 7.5% year-on-year and declined by 1.4% sequentially.

Sandeep Bakhshi
Sandeep Bakhshi
Managing Director and CEO at ICICI Bank

The overall loan portfolio, including the international branches portfolio, grew by 11.5% year-on-year and 1.7% sequentially at June 30, 2025. The overseas loan portfolio was about 2.4% of the overall loan book at June 30, 2025. The net NPA ratio was 0.41% at June 30, 2025, compared to 0.43% at June 30, 2024. During the quarter, there were net additions of INR 30.34 billion to gross NPAs, excluding write-offs and sales. The total provisions during the quarter were INR 18.15 billion, or 10.4% of core operating profit and 0.53% of average advances. The provisioning coverage ratio on non-performing loans was 75.3% at June 30, 2025. In addition, the bank continues to hold contingency provisions of INR 131 billion, or about 1% of total advances at June 30, 2025.

Sandeep Bakhshi
Sandeep Bakhshi
Managing Director and CEO at ICICI Bank

The capital position of the bank continued to be strong with a CET1 ratio of 16.31% and total capital adequacy ratio of 16.97% at June 30, 2025, including profits for Q1 of financial year 2026. Looking ahead, we see many opportunities to drive risk-calibrated, profitable growth and grow market share across key segments. We remain focused on maintaining a strong balance sheet, prudent provisioning, and healthy levels of capital while delivering sustainable and predictable returns to our shareholders. I now hand the call over to Anindya.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

Thank you, Sandeep. I will talk about loan growth, credit quality, P&L details, and the performance of subsidiaries. Sandeep covered the loan growth across various segments. Coming to the growth across retail products, the mortgage portfolio grew by 10.3% year-on-year and 1.9% sequentially. Auto loans grew by 2.2% year-on-year and declined by 0.7% sequentially.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

The commercial vehicles and equipment portfolio grew by 5.9% year-on-year and 1.1% sequentially. Personal loans grew by 1.4% year-on-year and declined by 1.3% sequentially. The credit card portfolio grew by 1.5% year-on-year and declined by 5.4% sequentially. The personal loans and credit card portfolio were 8.8% and 4% of the overall loan book, respectively, at June 30th, 2025. Within the corporate portfolio, the total outstanding to NBFCs and HFCs was INR 874.17 billion at June 30, 2025, compared to INR 918.38 billion at March 31, 2025. The total outstanding to NBFCs and HFCs was about 6.4% of our advances at June 30, 2025. The builder portfolio, including construction finance, lease rental discounting, term loans, and working capital, was INR 628.33 billion at June 30, 2025, compared to INR 616.24 billion at March 31, 2025. The builder portfolio was about 4.6% of our total loan portfolio.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

Our portfolio largely comprises well-established builders, and this is also reflected in the sequential increase in the portfolio. About 1.9% of the builder portfolio at June 30th, 2025, was either rated BB and below internally or was classified as non-performing. On credit quality, the gross NPA additions were INR 62.45 billion in the current quarter compared to INR 59.16 billion in Q1 of last year. There were gross NPA additions of about INR 7.67 billion from the Kisan Credit Card portfolio in the current quarter. We typically see higher NPA additions from the Kisan Credit Card portfolio in the first and third quarter of a fiscal year. Recoveries and upgrades from gross NPAs, excluding write-offs and sales, were INR 32.11 billion in the current quarter compared to INR 32.92 billion in Q1 of last year.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

The net additions to gross NPAs were INR 30.34 billion in the current quarter compared to INR 26.24 billion in Q1 of last year. The gross NPA additions from the retail and rural portfolios were INR 51.93 billion in the current quarter compared to INR 52.04 billion in Q1 of last year. These include the KCC NPAs mentioned earlier. Recoveries and upgrades from the retail and rural portfolios were INR 25.25 billion in the current quarter compared to INR 25.32 billion in Q1 of last year. The net additions to gross NPA in the retail and rural portfolios were INR 26.68 billion in the current quarter compared to INR 26.72 billion in Q1 of last year. The gross NPA additions from the corporate and business banking portfolios were INR 10.52 billion in the current quarter compared to INR 7.12 billion in Q1 of last year.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

Recoveries and upgrades from the corporate and business banking portfolios were INR 6.86 billion in the current quarter compared to INR 7.6 billion in Q1 of last year. There were thus net additions to gross NPAs of INR 3.66 billion in the current quarter in the corporate and business banking portfolios compared to net deletions of INR 0.48 billion in Q1 of last year. The gross NPAs written off during the quarter were INR 23.59 billion. Further, there was sale of NPAs of INR 1.08 billion in the current quarter compared to INR 1.14 billion in Q1 of last year. The sale of NPA includes about INR 0.6 billion in cash in the current quarter.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

The non-fund-based outstanding to borrowers classified as non-performing was INR 32.98 billion as of June 30, 2025, compared to INR 30.75 billion as of March 31, 2025, and INR 35.43 billion as of June 30th, 2024. The total fund-based outstanding to all standard borrowers under resolution, as per various guidelines, declined to INR 17.88 billion, or about 0.1% of the total loan portfolio, at June 30th, 2025, from INR 19.56 billion at March 31, 2025, and INR 27.35 billion at June 30th, 2024. Of the total fund-based outstanding under resolution at June 30th, 2025, INR 16.22 billion was from the retail and rural portfolios, and INR 1.66 billion was from the corporate and business banking portfolios.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

The loans and non-fund-based outstanding to performing corporate borrowers rated BB and below were INR 29.95 billion at June 30th, 2025, compared to INR 28.54 billion at March 31, 2025, and INR 41.64 billion at June 30th, 2024. This portfolio was about 0.2% of our advances at June 30th, 2025. Other than two accounts, the maximum single borrower outstanding in the BB and below portfolio was less than INR 5 billion at June 30th, 2025. At the end of June, the total provisions, other than specific provisions on fund-based outstanding to borrowers classified as non-performing, were INR 226.64 billion, or 1.7% of loans. This includes the contingency provisions of INR 131 billion, as well as general provisions on standard assets, provisions held for non-fund-based outstanding to borrowers classified as non-performing, and fund and non-fund-based outstanding to standard borrowers under resolution and the BB and below portfolio.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

Moving on to the P&L details, net interest income increased by 10.6% year-on-year to INR 216.35 billion in this quarter. The net interest margin was 4.34% in this quarter compared to 4.41% in the previous quarter and 4.36% in Q1 of last year. From Q1 of 2026, the bank has changed its convention of computation of NIM and other return ratios from actual number of days to number of months. While the full-year NIM would remain unchanged, the revised convention eliminates the quarter-to-quarter volatility in NIM computation due to difference in the number of days. The impact on reported ratios in this quarter was negligible. The impact of interest on income tax refund was about 7 basis points in the current quarter compared to about 2 basis points in the previous quarter and NIM in Q1 of last year.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

Of the total domestic loans, interest rates on about 53% of the loans are linked to the repo rate, 15% to MCLR and other older benchmarks, and 1% to other external benchmarks. The remaining 31% of loans have fixed interest rates. In comparison to the first quarter, the impact of transmission of repo rate cuts on external benchmark-linked loans is expected to be higher in the second quarter. This impact would be partially offset by reduction in savings account interest rates in May and June and the gradual repricing of term deposits. The domestic NIM was 4.4% in this quarter compared to 4.48% in the previous quarter and 4.44% in Q1 of last year. The cost of deposits was 4.85% in this quarter compared to 5% in the previous quarter and 4.84% in Q1 of last year.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

Non-interest income, excluding treasury, grew by 13.7% year-on-year to INR 72.64 billion in Q1 of FY 2026. Fee income increased by 7.5% year-on-year to INR 59 billion in this quarter. Fees from retail, rural, and business banking customers constituted about 79% of the total fees in this quarter. Dividend income from subsidiaries was INR 13.36 billion in this quarter compared to INR 8.94 billion in Q1 of last year. The year-on-year increase in dividend income was primarily due to higher dividends from ICICI Securities, ICICI AMC, and ICICI Lombard, and receipt of dividends from ICICI Securities' primary dealership in the current quarter compared to Q2 of last year. On costs, the bank's operating expenses increased by 8.2% year-on-year in this quarter compared to 8.3% in FY 2025.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

Employee expenses increased by 8.5% year-on-year in this quarter, reflecting mainly the impact of annual increments and promotions that take place during the first quarter of every fiscal year. Non-employee expenses increased by 8% year-on-year in this quarter. Our branch count has increased by 83 in the first quarter, and we had 7,066 branches as of June 30th, 2025. The technology expenses were about 10.7% of our operating expenses in this quarter. We continue to enhance the use of technology in our operations to provide simplified solutions to customers and make investments in our digital channels. We continue to further strengthen system resilience and simplify our process. The total provisions during the quarter were INR 18.15 billion as compared to the provisions of INR 13.32 billion in Q1 of last year. The provisions in Q1 of last year included the impact of release of AIF-related provisions of INR 3.89 billion.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

The provisions during the quarter were 10.4% of core operating profit and 0.53% of average advances. Adjusting for the seasonality of KCC provisioning, which occurs only in Q1 and Q3, the credit cost to advances would be about 50 basis points. The profit before tax, excluding treasury, grew by 11.4% year-on-year to INR 156.9 billion in Q1 of this year. Treasury gains were INR 12.41 billion in Q1 of the current year as compared to INR 6.13 billion in Q1 of the previous year, primarily reflecting realized and mark-to-market gains in fixed income securities and equities. The tax expense was INR 41.63 billion in this quarter compared to INR 36.34 billion in the corresponding quarter last year. The profit after tax grew by 15.5% year-on-year to INR 127.68 billion in this quarter. The consolidated profit after tax grew by 15.9% year-on-year to INR 135.58 billion in this quarter.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

The details of the financial performance of key subsidiaries are covered in slides 34-35 and 54-59 in the investor presentation. The annualized premium equivalent of ICICI Life was INR 18.64 billion in Q1 2026 compared to INR 19.63 billion in Q1 2025. The value of new business was INR 4.57 billion in Q1 2026 compared to INR 4.72 billion in Q1 2025. The value of new business margin was 24.5% in Q1 2026 compared to 22.8% in FY 2025. The profit after tax of ICICI Life was INR 3.02 billion in Q1 2026 compared to INR 2.25 billion in Q1 2025. Gross direct premium income of ICICI General increased to INR 77.35 billion in Q1 2026 from INR 76.88 billion in Q1 2025. The combined ratio stood at 102.9% in Q1 2026 compared to 102.3% in Q1 2025.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

The profit after tax increased to INR 7.47 billion in this quarter from INR 5.8 billion in Q1 of last year. With effect from October 1, 2024, long-term products are accounted on one-by-end basis as mandated by IRDAI. Hence, Q1 numbers are not fully comparable with prior periods. The profit after tax of ICICI AMC as per NDS was INR 7.82 billion in this quarter. The profit after tax of ICICI Securities as per NDS on a consolidated basis was INR 3.91 billion in this quarter compared to INR 5.27 billion in Q1 of last year. ICICI Bank Canada had a profit after tax of CAD 7.8 million in this quarter compared to CAD 20.3 million in Q1 last year. ICICI Bank UK had a profit after tax of $5.9 million in this quarter compared to $7.7 million in Q1 of last year.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

As per NDS, ICICI Home Finance had a profit after tax of INR 2.14 billion in the current quarter compared to INR 1.17 billion in Q1 of last year. With this, we conclude our opening remarks, and we will now be happy to take your questions.

Operator

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. In order to ensure management is able to answer queries from all participants, kindly restrict your questions to two at a time. You may join back the queue for follow-up questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take our first question from the line of Mahrukh Adajania from Nuvama Wealth Management. Please go ahead.

Mahrukh Adajania
Research Analyst at Nuvama Wealth Management

Yeah, hello. So. My first question was on margins regarding the change in method. Now, fourth quarter is the quarter where you see the biggest positive impact of the old method. So. In fact, your margin decline, even adjusted for the tax refund, interest on tax refund, appears to be just four to five basis points. Is that a correct assessment? That's my first question. Or if you could give a like-to-like comparison of margins for the fourth quarter, that would be even better. And then my second question is on growth because that is an obvious challenge for the sector, and nothing seems to be growing much other than low-yield corporate loans. Home loans, there's intense competition.

Mahrukh Adajania
Research Analyst at Nuvama Wealth Management

So when do you see growth reviving, and where do you see our growth settle? I mean, ICICI loan growth settle? Because mid-teens, I mean, would mid-teens still be possible? Yeah, those are my questions.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

So thanks, Mahrukh. On the first one, yeah, the. On the reported margin for Q4 would have been a few basis points lower. So the kind of range that you spoke of is probably correct. As far as, but equally, the same Q3 to Q4 spike will not happen in the current year. We'll have a more even spread of the reported margin through the year. On the growth side, I think. As you know, I think in the first. Quarter, there have been a number of. Global events, etc., which have. Had some impact on, I guess, on sentiment. But.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

The substantial monetary easing that has taken place, starting from Q4 particularly and carried through into Q1. Will also have some positive impact, hopefully, as we go along. So I think it's too early to say we will have to wait for another quarter to really form a view about how it's going to go.

Mahrukh Adajania
Research Analyst at Nuvama Wealth Management

Okay, thanks a lot. Thank you.

Operator

Thank you. We'll take our next question from the line of Kunal Shah from Citigroup. Please go ahead.

Kunal Shah
Kunal Shah
Assistant VP at Citigroup

Yeah, hi. So sorry, again, to touch upon on margins. So fair to say maybe the unwinding, which was expected to come in in the first quarter. Maybe because of this day benefit, that wouldn't have been there in this particular quarter. Otherwise, any which way is like we are comparing 4.41 to 4.34. So maybe like 4, 5 basis points of unwinding is not really there in this quarter.

Kunal Shah
Kunal Shah
Assistant VP at Citigroup

And thereafter, maybe adjusting for interest on income tax refund, we have seen like 14 basis points kind of a decline in NIMs on a quarter-on-quarter basis. So would that be correct?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

No, that would not be correct because there is no unwinding in the first quarter. The NIM typically declines from the Q4 to Q1 because of the higher number of days in Q1. There is a pickup again in Q4. The Q4 NIM, if we had used an equal month basis, would have been lower than the reported number of 4.41. I think this is the way one has. That is why even in our previous calls, we have focused attention on the previous year's full year NIM of 4.3% as the anchor for further discussion. We thought that it would also be good to eliminate that one confusion point. Yeah.

Kunal Shah
Kunal Shah
Assistant VP at Citigroup

No, so only thing was maybe I was unwinding, I just meant to say that the benefit which was there in the fourth quarter, that would have been relatively lower in the first quarter by, say, four or five basis points, which goes away, which is not there in the computation now.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

No. The method, if you look at, for example, the reported margins for this year on the new basis and Q1 last year on the old basis are almost the same. There is no real impact. That impact largely comes later in the year. The first quarter is not impacted at all. If you are looking at a sequential analysis, then on a like-to-like basis, the reported margin for Q4 would have been a little bit lower.

Kunal Shah
Kunal Shah
Assistant VP at Citigroup

Yeah, so would that have been like 8-9 basis points, how much it would have been lower, yeah?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

I think I answered. The range that Mahrukh quoted was probably the correct range.

Kunal Shah
Kunal Shah
Assistant VP at Citigroup

Okay, okay. Got it. Perfect. Yeah. Secondly, with respect to the credit cost, we have been indicating that it would normalize in a gradual manner. This quarter would have KCC slippages. But excluding that, when we look at it, the credit cost, okay, so would we say like now we have reached, or maybe there is a further normal gradualization, which has still to happen from the current levels adjusting for KCC? Because we are already seeing like 50, there would be some impact of KCC. Do we expect further normalization, or maybe this is more like a clean margin which we are seeing now, clean credit cost which we are seeing now?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

I think we have always said that currently, your underlying level would be more like about 50 basis points. Can that interrupt? It could, but I do not see anything major, any major movement.

Kunal Shah
Kunal Shah
Assistant VP at Citigroup

Okay. Got it. Yeah. Thanks. Yeah.

Operator

Thank you. Next question is from the line of Harsh Modi from JPMorgan. Please go ahead.

Harsh Modi
Harsh Modi
Managing Director at JPMorgan

JPMorgan Chase, thanks for that. Couple of questions. First is, if I see your mix on corporate creditors, the AA- mix has been reducing over the last few years, and BBB- has been increasing. Is that the best sweet spot on RORWA? That's why you're doing it? Any risks around that? That is first one. Second one is on business banking, very good numbers. What went right?

Harsh Modi
Harsh Modi
Managing Director at JPMorgan

Going forward, if you think about the mix of credit growth over the next, let's say, couple of years, where should we see the incremental delta coming from? Any granularity you can provide and dictate. Thank you.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

On the first question, I think the decline in the proportion of the very high rated is partly a function of demand and partly a function of pricing. In some cases, we may have, in earlier periods of very easy liquidity, built up some portfolio there, and that has gradually run off as the funding environment got tighter. Currently, of course, as you would know, overall credit growth itself has come down. In this particular segment, there is a fairly high price competition.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

We would really look at this segment as we look at all the other corporate borrowers from a customer 360 perspective and look at the totality of our relationship with the borrower. In that context, if lending makes sense, we would do it. As far as the increase in the proportion, I think we are very comfortable with the whole entire, I think, A bucket. We don't have, we feel that, to answer your question, that is probably the segment where you do have the right balance of risk-reward. Although we have competition in those segments also. On the lower rated origination and BBB and below, we have fairly tight controls and limits on how we approach that segment. It is quite calibrated. Overall, I think the reduction in the proportion of the very high rated is really a function of demand and pricing.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

On your second question on business banking, I think we have spoken about it in the past couple of calls. To keep it short, I would say it's a combination of distribution, process, and technology, the digital interfaces and capabilities that we offer to the customers, and also a fairly tight focus on monitoring of the credit and managing the portfolio in a disciplined way.

Harsh Modi
Harsh Modi
Managing Director at JPMorgan

All right. Sorry, can I have just one more question on the liability side?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

Sorry, the last part of your question was on mix going forward. I think, based on the visibility and the market share opportunity, one would expect the business banking piece to grow faster than the overall loan book, and therefore, that proportion should gradually go up.

Harsh Modi
Harsh Modi
Managing Director at JPMorgan

Right. Thank you. One more on the liability side. It seems you have been gaining market share on current account and savings account deposits nationwide.

Harsh Modi
Harsh Modi
Managing Director at JPMorgan

Now, with rate cuts, how do you see behavior changing? Any early signs of a higher degree of competition, more preponderance of sweep accounts, and so on and so forth? Do you see market share stabilizing, or do you still see CASA market share growing for the bank over the next, let's say, 12 months? Thank you.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

I think CASA is not really a—the current account, of course, is purely the result of presence in the transaction flows of corporate businesses, capital market players, and so on. The savings account is the result of being sort of the primary bank or the transacting bank of the retail customer, and that is how money comes in, goes out, and some level of float stays in those accounts. I do not think that there is any particular change in the competitive scenario.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

If you see in the quarter, I think the rate actions taken by all the large banks have been more or less in the same line. Given the decline in the overall interest rates and the policy environment, we would continue to focus on this segment by increasing customer acquisition, increasing our share of the customer's wallet, and trying to become the primary banker. We would hope that we will continue to do reasonably well.

Harsh Modi
Harsh Modi
Managing Director at JPMorgan

Thank you.

Operator

Thank you. Next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.

Nitin Aggarwal
Equity Analyst at Motilal Oswal

Good evening, everyone, and congrats on another set of good numbers. I have three questions. One is around the decline in cost of deposits that we have reported in the quarter. It seems fairly sharp, 15 basis point decline.

Nitin Aggarwal
Equity Analyst at Motilal Oswal

Is it like the unwinding that we have done in respect of, of course, deposits that has resulted in this kind of decline? Has it played out fully, or will this continue along with benefits in Q2 also?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

There is no unwinding. As I said, the impact of the equal month convention on the reported NIM for the quarter and other issues for the quarter is negligible. As far as the decline in deposit cost, it is clearly the reduction in the savings account deposit rate, which has—a large part of it was 25 basis points that was there in April, which the benefit of that has been there for pretty much the full quarter. Then on the higher value deposits, there was another cut in May, which also helped. In addition, of course, as the retail term deposit also gradually—the incremental rates repricing would reflect.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

Plus, during the quarter, we saw a reasonable reduction in our wholesale deposit book, given the continued strong growth in CASA and retail term deposits and the high liquidity that we were running. The runoff of the wholesale deposit book also helped in the funding cost.

Nitin Aggarwal
Equity Analyst at Motilal Oswal

That was—yeah, actually I was referring to the wholesale deposit unwinding that we have done. So the benefit of that has played out fully in this quarter, or do you expect that to continue?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

It's difficult to really say. I think we have not been aggressively raising wholesale deposits. I think, as I said in the opening remarks, we would continue to see a gradual benefit of deposit cost repricing in Q2. There will also be a higher impact of the 50 basis points repo part of June.

Nitin Aggarwal
Equity Analyst at Motilal Oswal

Right. Second question, Anindya, is around the unsecured retail growth.

Nitin Aggarwal
Equity Analyst at Motilal Oswal

How are we looking at that segment? Because while we have been able to deliver healthy growth, because of the systemic softness in the overall credit demand, the growth overall has come down to 3. Our unsecured retail segments have not been able to contribute as we normally. How are we seeing at those segments, given the asset quality has seen some stabilization? How do we look at those segments in terms of their contribution going forward?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

I think clearly we can do more on both personal loans and credit cards. In personal loans, I think, as we may have commented in the past, we are quite comfortable with the quality of origination done over the last 12-15 months. I think we can see volumes pick up and see some better growth there. Similarly, on cards also going forward, maybe some better customer acquisition is also something we can see.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

I think we're quite focused on both the segments. We could do better there than what we've done in Q1.

Nitin Aggarwal
Equity Analyst at Motilal Oswal

Right. Lastly, on the business banking, that has a segment which has been going very well for us and earning very good yields. How do you really ensure that we don't go on to see some challenges in respect to asset quality? Because the kind of growth on a very decent base that the segment is at now. How do we ensure that we don't get into sort of asset quality challenges in this segment? Any tightening that we have done in the recent quarters? We have talked about the underwriting conditions being tightened in the past. Are we looking at this on a continuous basis as the environment is getting tougher around some of these segments?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

As I said, we monitor the portfolio continuously.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

Just to put the numbers in context, if you look at the gross NPA additions to the corporate and business banking portfolios in the quarter, they were about INR 10 billion on an aggregate portfolio of about INR 5.6 trillion. The business banking portfolio alone is now about INR 2.7 trillion. I think the current sort of credit behavior and asset quality is extremely benign. We will probably see some increase going forward, but credit costs today are negligible. They may go up slightly, but the portfolio is granular and tightly monitored.

Nitin Aggarwal
Equity Analyst at Motilal Oswal

Right. Thanks, Anindya. This is very helpful.

Operator

Thank you. We'll take our next question from the line of MB Mahesh from Kotak Securities. Please go ahead.

MB Mahesh
Executive Director at Kotak Securities

Anindya, just on this, again, this question on margins.

Operator

I'm sorry to interrupt. Can you use your handset mode, please? Your line is not very clear.

MB Mahesh
Executive Director at Kotak Securities

Anindya, on this question on margins, there's a yield side with the drop of 25 basis points that we've seen. Is it possible to kind of quantify how much of the yields—sorry, how much of the retail cuts have flown through the loan book?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

We have not quantified it. If you look at the February cut, I think it would have largely flown through almost entirely. The April cut also would have substantially flown through. Maybe we have a little bit more to happen in Q3. The June cut, I would say, has not flown through much. Most of that will come through in Q2.

MB Mahesh
Executive Director at Kotak Securities

Sorry, just to answer the previous question, you said that the bulk of the benefit on the cost deposit side has come from the savings account? Given that the contribution of wholesale is fairly small.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

That you can just compute. That's just computable, a 25 basis points cut on the portfolio that would have yielded a reasonable benefit.

MB Mahesh
Executive Director at Kotak Securities

The second question on the demand environment. When you say that you're ready to accelerate, portfolio is good. Is it a question of demand being an issue on the ground, or is it a problem with pricing?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

I think it's the part. Maybe there is some pricing, but probably we also need to focus a little more on the distribution and the throughput. I wouldn't say that in some of these segments it is purely demand. If you're talking about PL and cards. Other segments, of course, overall loan growth in the system is what it is. That reflects some softness in demand.

MB Mahesh
Executive Director at Kotak Securities

Perfect. Last one, one question. Are you allowed to restructure any standard assets? Let's say if it's in a default book in the SMA 0,1 and 2, are you allowed to restructure it and classify it as standard?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

No.

MB Mahesh
Executive Director at Kotak Securities

Okay. Thank you.

Operator

Thank you. Next question is from the line of Rikin Shah from IIFL Capital. Please go ahead. Sorry, we've lost the connection. We'll take the next question from the line of Piran Engineer from CLSA. Please go ahead.

Piran Engineer
Piran Engineer
Investment Analyst at CLSA

Yeah. Hi, team. Congrats on the quarter. Just firstly, a couple of clarifications on previous questions. Nitin's question on 15 basis points reduction in cost of deposits, that also includes the number of days thing, right? Core deposit cost would not have gone down 15 basis points, correct? QoQ?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

As I said, the deposit margins for the first quarter, on both bases, there would be a negligible difference, which is what we have mentioned in our opening remarks.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

Relative to the fourth quarter, the margins would have been, the decline in margins would have been somewhat lower on a comparable basis.

Piran Engineer
Piran Engineer
Investment Analyst at CLSA

But then, Anindya, how do I think about it in the context of you versus peers where your margins are down, say, 5-6 bps? Core NIMs, HDFC, Axis are down 12-13 bps. Is it just a more delayed pass-through of the repo rate cuts? Is that how I should simplistically put it? Because all of y'all have cut SAR rates at approximately the same time and by the same amount.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

I do not.

Piran Engineer
Piran Engineer
Investment Analyst at CLSA

And similar EPL.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

I cannot really comment on others. I think we have, to begin with, been always saying that we have to look at the full year margin of last year of 4.3%. The repo rate cut and the lagged repricing of deposits will create some pressure on that.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

In the first quarter, I think we had the upfront benefit of the savings deposit rate cut, and we also had six-seven basis points of the benefit of interest on income tax refund. As we go into Q2, the full impact of the 50 basis points repo cut of June will come into effect. We will also have some continuing repricing of term deposits as well as the benefit of the savings rate cut that happened in May and June. Then in Q3, I guess, unless there is any change in the policy stance, the benefit of the CRR cut will also kick in.

Piran Engineer
Piran Engineer
Investment Analyst at CLSA

Okay. Okay. That is helpful. Just secondly, if I have to compare retail term deposits today versus, say, wholesale term deposits today, and even adjusted for the outflow rate and the LCR computation, would wholesale rates be similar to TD rates now or lower?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

No, lower. They would be lower.

Piran Engineer
Piran Engineer
Investment Analyst at CLSA

They will be lower, right? So then why are we trimming wholesale deposits when it is lower? That is what I do not get.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

I think it is a function of the overall liquidity that we are carrying if you look at the CAFA and the term deposits. So what we have trimmed is, what has gone down is the deposits that were raised in the past at higher rates. If we get deposits at the rates we are quoting now, we will take them.

Piran Engineer
Piran Engineer
Investment Analyst at CLSA

Understood. Understood. And just lastly on vehicle loans, I mean, as growth has gone down to 2%-3%. Now, of course, demand has slowed down. There is no doubt about it. It is not slowed down so much also. Is this more a function of us just being cautious on pricing, and that is why we are choosing not to grow here?

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

I think price competition has always been a part of it. Of course, the underlying asset class also is not growing at that pace.

Piran Engineer
Piran Engineer
Investment Analyst at CLSA

Okay. Got it. Okay. Thank you, Anindya.

Operator

Thank you. Ladies and gentlemen, we will take that as the last question for today. I now hand the conference over to management for closing comments. Over to you, sir.

Anindya Banerjee
Anindya Banerjee
CFO at ICICI Bank

Thank you very much for taking time on a Saturday, and we are happy to clear any other doubts offline. Thank you.

Operator

Thank you. On behalf of ICICI Bank, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Executives
Analysts
    • Nitin Aggarwal
      Equity Analyst at Motilal Oswal
    • MB Mahesh
      Executive Director at Kotak Securities
    • Harsh Modi
      Managing Director at JPMorgan
    • Kunal Shah
      Assistant VP at Citigroup
    • Piran Engineer
      Investment Analyst at CLSA
    • Mahrukh Adajania
      Research Analyst at Nuvama Wealth Management
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