ICICI Bank’s ‘Baa3’ rating reaffirmed by Moody’s on strong financials

Global rating agency Moody’s Ratings has reaffirmed ICICI Bank Limited’s Baa3 long-term deposit ratings, maintaining a stable outlook, the bank said in a stock exchange filing on Tuesday.

The reaffirmation, according to the Moody’s, reflects the bank’s “robust financial position,” which is underpinned by a diversified loan portfolio and above-industry-average profitability. These factors are expected to bolster the bank’s internal capital generation and overall strong solvency.

Profitability and Asset Quality: Key Strengths

Moody’s cited ICICI Bank’s superior profitability as a key driver for the rating. The bank’s return on assets (ROA) stood at 2.0%for the six months ending September 2025, significantly higher than the industry average of 1.4% for the fiscal year 2025. This strong performance is supported by a healthy net interest margin (NIM), diversified non-interest income, and operational efficiencies. The agency anticipates this positive profitability trend to continue, expecting only a modest rise in credit costs.

The bank’s asset quality remains a significant credit strength, with its gross non-performing loan (NPL) ratio at a low 1.6% as of September 2025, better than the industry average of 2.3% (as of March 2025). This stability is supported by stable employment conditions and adequate coverage for secured retail loans (such as housing and vehicle loans). Furthermore, the note highlighted a material slowdown in the growth of unsecured retail credit, which is also favorable for asset quality.

The bank’s capital position is robust, with a consolidated Common Equity Tier 1 (CET1) ratio of 16.1% as of September 2025 (including year-to-date profits), providing a substantial cushion against potential risks.

Funding and Government Support

Moody’s also highlighted funding and liquidity as credit strengths. A major portion of ICICI Bank’s funding comes from retail deposits, including a sizable amount of low-cost Current and Savings Account (CASA) deposits. The bank’s adequate liquidity buffers are further strengthened by its substantial holdings of government securities.

Recognizing ICICI Bank as the second-largest private-sector bank in India, with a large retail deposit franchise and systemic importance to the national payments system, Moody’s assesses a moderate probability of government support should the need arise.

Downgrade and Upgrade Scenarios

While the outlook is stable, Moody’s noted that an upgrade to ICICI Bank’s deposit ratings and Baseline Credit Assessment (BCA) is unlikely because they are currently at the same level as India’s sovereign rating.

However, a downgrade is possible if the BCA were to be lowered by more than one notch. This risk could be triggered if the bank’s financial metrics deteriorate, specifically if the tangible common equity/risk-weighted assets ratio falls below 12%, the NPL ratio exceeds 6%, and the net income/tangible assets ratio drops below 0.4%.

The stable outlook reflects Moody’s expectation that ICICI Bank will maintain its strong performance, supported by its retail franchise, access to low-cost deposits, and prudent risk management.

Disclaimer: This article was generated using AI tools and has undergone editorial review for clarity and coherence.