Global rating agency Moody's Ratings has maintained its confidence in ICICI Bank Limited, reaffirming its long-term deposit ratings at Baa3 with a stable outlook. The bank announced this development in a filing to the stock exchanges on Tuesday.
Financial Strength and Profitability Drive Rating
Moody's stated that the rating affirmation is a direct result of the bank's robust financial position. This strength is built on a well-diversified loan book and profitability metrics that consistently outperform the industry average. These factors are seen as key to supporting the bank's internal capital generation and its overall strong solvency profile.
The agency specifically highlighted ICICI Bank's superior profitability as a major credit driver. For the six months ending September 2025, the bank's return on assets (ROA) was a strong 2.0%. This figure is notably higher than the industry average of 1.4% recorded for the fiscal year 2025. This performance is fueled by healthy net interest margins, a diversified stream of non-interest income, and operational efficiencies. Moody's expects this trend of strong profitability to continue, forecasting only a modest increase in credit costs.
Asset Quality and Capital Position Remain Robust
The bank's asset quality continues to be a significant strength. As of September 2025, its gross non-performing loan (NPL) ratio stood at a low 1.6%. This is better than the industry average of 2.3% from March 2025. Stable employment conditions and sufficient coverage for secured retail loans, like housing and vehicle finance, support this stability. Moody's also noted a material slowdown in the growth of unsecured retail credit, which is viewed favorably for future asset quality.
On the capital front, ICICI Bank's position is exceptionally strong. Its consolidated Common Equity Tier 1 (CET1) ratio was 16.1% as of September 2025, which includes profits earned year-to-date. This provides a substantial buffer to absorb potential financial shocks.
Funding, Liquidity, and Government Support
Moody's identified funding and liquidity as additional credit strengths for the bank. A large share of ICICI Bank's funding comes from stable retail deposits, including a significant portion of low-cost Current and Savings Account (CASA) deposits. The bank's liquidity buffers are further reinforced by its substantial holdings of government securities.
Recognizing ICICI Bank as the second-largest private-sector bank in India, with a major retail deposit base and systemic importance to the national payments infrastructure, Moody's assesses a moderate probability of government support in case of need.
Potential for Downgrade and Upgrade Scenarios
While the outlook is stable, Moody's indicated that an upgrade to the bank's deposit ratings and Baseline Credit Assessment (BCA) is unlikely in the near term. This is because they are currently aligned with India's sovereign rating.
However, a downgrade could occur if the bank's BCA is lowered by more than one notch. Such a scenario might be triggered by a deterioration in key financial metrics. Specifically, risks include the tangible common equity to risk-weighted assets ratio falling below 12%, the NPL ratio exceeding 6%, or the net income to tangible assets ratio dropping below 0.4%.
The stable outlook ultimately reflects Moody's expectation that ICICI Bank will continue its strong performance, backed by its powerful retail franchise, access to low-cost deposits, and prudent risk management practices.
