Mumbai: ICICI Bank expects its net interest margins to come under pressure in the months ahead, as the Reserve Bank of India’s repo rate cuts begin to bite. The private sector lender anticipates further easing from the central bank, a senior executive said on Saturday—offering a cautious outlook even as the bank reported strong earnings.
The bank reported a net interest margin (NIM) of 4.41% for the March quarter of FY25, up from 4.25% in the previous quarter. However, margins were largely flat compared to the same period last year, when NIM stood at 4.4%.
“The movement in NIM from Q3 to Q4 was primarily due to the impact of day count, which we had in a way highlighted earlier,” Sandeep Batra, executive director of ICICI Bank, told reporters after the bank announced its March quarter earnings.
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Back in October, group CFO Anindya Banerjee had also attributed quarterly NIM movements to calendar effects, saying that these would likely reverse in the March quarter.
Batra added that the 50-basis-point cut in the cash reserve ratio (CRR) in December, along with interest income from tax refunds, also supported margins during the quarter. However, these gains were offset in part by the repo rate cut and a rise in funding costs.
From a structural standpoint, ICICI Bank’s NIM had hovered around 4% before the rate hike cycle began in FY22. As policy rates rose, margins expanded to about 4.5%, before gradually easing to 4.3% this year.
“In the near term, I think we will follow by and large what’s happening in the banking system. And these margins would be impacted by repo rate cuts. And we do expect more repo rates to happen,” Batra said.
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Despite margin pressures, ICICI Bank reported a robust standalone net profit of ₹12,630 crore for the quarter ended 31 March 2025, an 18% year-on-year increase, and surpassing Bloomberg’s consensus estimate of ₹11,897 crore.
Analysts were pleased with the profitability of the bank.
“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),” analysts at Sanford C. Bernstein (India) Pvt Ltd said in a note to clients on Saturday.
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Still, the note flagged a slower pace of loan and deposit growth compared to the December quarter, making it a slightly softer quarter in the context of already high expectations.
As of 31 March, ICICI Bank’s domestic advances rose 13.9% year-on-year and 2.2% sequentially. Retail loans, which comprised 52.4% of the overall portfolio, grew 8.9% year-on-year and 2% sequentially. The domestic corporate portfolio grew 11.9% year-on-year but slipped 0.4% sequentially.