Deposits shine in ICICI Bank’s Q1
₹9,650 crore. This was driven by 35% growth in core operating profit. The bank’s deposit and credit (loans) grew by 18% each.
The deposit performance was one of the key highlights of the quarter with growth being the highest in nine quarters. Growth was led by term deposits, as expected. Credit growth was driven by the retail segment including personal loans, credit cards, auto finance and SME segment.
Strong credit growth gave a fillip to the bank’s net interest income. ICICI Bank’s management expects deposits would continue to reprice in coming quarters. Note that deposits rate repricing happens with a lag unlike loan rates transition which is faster.
As deposits get repriced, cost of funds increases for banks. This, in turn, weighs on net interest margins (NIM). ICICI Bank saw some pain on account of this in Q1 with its blended NIM falling 12 basis points (bps) seque-ntially to 4.78%.
In Q1, the cost of funds rose to 4.6% from 4.29% in Q4FY23. ICICI Bank’s management believes the cost of funds would continue to increase. “Going forward, management expects cost of deposits to continue to increase over the next couple of quarters (at 4.31% for Q1FY24, +33 bps quarter-on-quarter, 85 bps year-on-year) as deposit repricing plays out," said analysts from JM Financial Institutional Securities Ltd.
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