Mumbai: ICICI Bank expects its net interest margin to be under pressure in the coming months as the Reserve Bank of India cuts its tax rate. Private sector lenders expect central banks to relax further, offering cautious prospects even if banks report high yields, a senior executive said on Saturday.
The bank reported net interest margin (NIM) for the March quarter of FY25 at 4.41%, up from 4.25% in the previous quarter. However, compared with the same period when NIM was 4.4% last year, the profit margin was basically flat.
“The NIM’s movement from the third quarter to the fourth quarter is mainly due to the impact of the dates we highlighted earlier,” Sandeep Batra, executive director of ICICI Bank, told reporters.
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Back in October, CFO Anindya Banerjee’s group also attributed quarterly NIM movements to the calendar effect, saying that these movements could be reversed in the March quarter.
Batra added that 50 benchmark points of the cash reserve ratio (CRR) in December and interest income from tax refunds also supported margins for the quarter. However, these gains are partially offset by cuts in repurchase rates and rising capital costs.
From a structural perspective, ICICI Bank’s NIM hovered 4% before the start of the interest rate hike cycle in fiscal 22. As policy interest rates rise, profit margins expand to about 4.5%, and then gradually reduce this year to 4.3%.
“In the short term, I think we will have an overall impact in the banking system. These margins will be affected by the cutbacks. We do want more repurchase rates to occur,” Batra said.
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Despite margin pressure, ICICI Bank reports strong independent net profit ₹As of March 31, 2025, the quarter’s 126.3 billion yuan was up 18% year-on-year, exceeding Bloomberg’s consensus estimate ₹118.97 million.
Analysts are satisfied with the bank’s profitability.
“ICICI reported yet another strong quarter on the profitability front with the RoA (return on asset) climbing above 2.5% (+16 bps QoQ), thanks to a sharp net interest margin improvement and continued ultra-low credit costs, helping it deliver an EPS (earnings per share) growth of 17% YoY (vs. 11% consensus),” analyzes at Sanford C. Bernstein (India) Pvt Ltd said in a note to clients on Saturday.
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Nevertheless, the note still marks a slower growth in loans and deposits compared to the December quarter, which makes its quarter slightly softer against the backdrop of already high expectations.
As of March 31, ICICI Bank’s domestic progress increased by 13.9% year-on-year, 2.2% in turn. Retail loans accounted for 52.4% of the overall portfolio, up 8.9% year-on-year, up 2% in turn. Domestic companies’ portfolios grew by 11.9% year-on-year, but fell by 0.4% in turn.
