ICICI Bank Q2 profit rises 20% as faster loans and fees offset thinner margin

ICICI Bank, a large private lender for homes, cards, small firms and large companies, filed unaudited results for the quarter and six months ended September 30, 2026. Standalone profit after tax, or profit after tax, rose 20.1% year-on-year in Q2 FY27, while group profit rose 22.3% . Growth in loans and fees plus lower provisions more than covered a lower margin and a small treasury loss.

Income grew faster than costs to lift profit

Core operating profit grew because income from lending and fees rose well ahead of staff and other costs, while provisions eased.

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The margin is annualised interest earnings after funding cost, scaled to assets. Cost-to-income is the bank-reported operating efficiency ratio; a lower ratio indicates lower costs relative to income. Cost-to-income improved year-on-year, falling from 40.6% to 38.4%, but worsened from 38.1% in Q1 FY27. Net interest margin fell both year-on-year and sequentially .

Fee growth offset lower subsidiary dividends

Fee income drove other income, while dividends from subsidiaries fell and treasury turned negative. That is why profit excluding dividends grew faster than headline core profit.

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Operating expenses rose more slowly than income. Employee costs picked up, while non-employee costs grew modestly, leaving cost-to-income lower than a year ago . Provisions fell year-on-year and sequentially, at 4.1% of core operating profit in Q2 FY27 .

On a group basis, net interest income rose 15.9% year-on-year and profit after tax rose to ₹16,333 crore in Q2 FY27 . For H1 FY27, standalone profit after tax was ₹29,648 crore and consolidated profit after tax was ₹31,773 crore .

Margin slipped as loan yields fell faster than deposit costs

Lending rates reset down while funding eased only partly

The bank earned less on each rupee lent even after paying a little less for deposits than a year ago. Funding cost ticked up sequentially, adding to the squeeze.

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About 57% of the domestic loan book is linked to the repo rate and other external benchmarks, 29% is fixed rate and 14% is linked to MCLR and older benchmarks at September 30, 2026 . That linkage helps explain why asset yields repriced quickly.

Management had said in July that excluding interest on tax refunds the margin was stable around 4.27-4.28%, and that it expected margins in FY27 to stay range-bound assuming no policy rate moves . It also flagged that mobilisation under the FCNR(B) deposit programme could be slightly margin-dilutive as the overseas balance sheet expands, but earnings-accretive because the funds get deployed .

Business banking and corporate loans outpaced retail and rural

Total loans grew well ahead of last year, with small-business and corporate books expanding faster in percentage terms than retail and rural. Excluding loans by international branches against FCNR(B) deposits, growth was still strong .

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Business banking covers borrowers with turnover up to ₹750 crore . Including non-fund outstanding, retail and rural was 43.0% of the total portfolio at September 30, 2026 .

That mix shows up in segment profit, where wholesale moved ahead of retail in the quarter while treasury slipped.

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Management says it sets no target for retail versus corporate share and lends where pricing and credit thresholds are met on a 360-degree customer basis . In July it linked the corporate pickup to working-capital demand and a shift from bond markets, plus liquidity buffers .

Retail stayed granular while cards shrank

Mortgages, personal loans and jewel loans grew, while credit cards declined year-on-year. Most mortgage customers have an existing relationship with the bank, and the reported loan-to-value ratios are conservative.

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About 63% of the mortgage portfolio consists of home loans, whose average ticket size is about ₹42 lakh. About 90% of mortgage customers have an existing relationship with the bank . For cards, the bank cites brand tie-ups, UPI on credit card and EMI campaigns to drive spends, with about 70% of the personal loan and card book to existing customers . Small-business growth is tied to branch network and InstaBIZ, Merchant STACK, Trade Online and DigiEase onboarding, with focus on parameterised, collateralised lending .

Term deposits funded growth as CASA share slipped

Period-end deposits grew faster than a year ago, helped by FCNR(B) inflows. On an underlying basis growth was slower, and low-cost current and savings deposits grew more slowly than term deposits.

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Average deposits rose 21.2% year-on-year in Q2 FY27, but average CASA ratio fell to 35.8% from 39.2% a year ago . The domestic credit-to-deposit ratio was 84.0% at September 30, 2026 .

Bad-loan ratios fell and buffers stayed large

Net and gross bad-loan ratios improved year-on-year and sequentially, even as the loan book expanded sharply. Absolute gross bad loans eased from June, with net additions lower than a year ago.

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Gross additions were largely from retail and rural, partly offset by recoveries and upgrades . Retail and rural gross bad loans were 1.25% of advances, down from 1.54% a year ago .

Provisions were 0.20% of average advances in Q2 FY27, down from 0.26% a year ago . The bank holds standard, contingency and other provisions of ₹23,815 crore, or 1.3% of advances, including contingency provisions of ₹13,100 crore . That is separate from an additional ₹1,283 crore standard asset provision on farm priority-sector loans made in Q3 FY26 on RBI direction . Management in July called Q1 and Q3 seasonally higher for farm slippages and put normalised credit cost around 50 basis points after adjusting for chunky recoveries . Capital stayed strong, with Common Equity Tier 1 at 16.01% and total capital adequacy at 16.68% at September 30, 2026 including profits .

Insurers and asset manager lifted group profit

Insurance premium flows and subsidiary profits supported consolidated earnings. Life insurance profit rose year-on-year, while general insurance grew despite a high combined ratio.

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Consolidated premium income rose 16.1% to ₹21,393 crore in Q2 FY27 . ICICI Life annualised premium equivalent was ₹2,799 crore in the quarter, while ICICI General gross direct premium was ₹6,792 crore with combined ratio at 107.0% . The board approved the results at its October 17 meeting and also proposed seeking RBI approval for the part-time chairperson's extended term .

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Sources

1. 1 Financial results: Standalone-Sep-Qtr-2026, Consolidated-Sep-Qtr-2026
2. 2 Investor presentation, 2026-10-17
3. 3 Earnings-call transcript, 2026-07-23
4. 4 Board Meeting Outcome for Outcome Of Board Meeting Held On October 17, 2026