CSB Bank conducted a conference call 29 January 2024 to discuss its financial results for the quarter ended December 2023. Pralay Mondal. MD and CEO of the Bank addressed the call:

Highlights:

On the global economic front, the bank sees interest rates to have peaked out as many central banks indicated at reduction in the policy rates. The inflation rate has also dropped significantly. However, the geopolitical tension continues to persist.

Domestically also the core and headline inflation is showing some signs of moderation indicating at peaking of high interest rate regime.

However, the concern is the persistent high liquidity deficit in the banking system, which has touched even Rs 3 lakh crore in the recent past. It adds to the borrowing cost of the banks. The bank expects liquidity conditions to improve in FY2025.

The bank has maintain and interest margin of above 5% in Q3 as well as 9MFY 2024.

The bank has provision buffer of Rs 167 crore end December 2023.

The cost of deposits increased to 5.42% in Q3FY2024 from 5.22% in last quarter. The yield on advances improved to 11.49% from 10.88% a quarter ago.

The cost of funds is expected to be remain elevated for next 3 to 6 months.

The deposits have increased 21% with moderate 6% growth in Casa deposits.

The net advance increased 23% with the strong 23% growth in the gold loans.

The asset quality has been stable with healthy provision coverage ratio of 75% excluding write offs.

As per the bank, the market is offering ample opportunity to the bank to grow.

The management team of the bank is complete and the bank has entire management in place.

The gold loan growth of the bank has moderated to 23% as the bank focused on balancing the portfolio mix between the gold and non gold loan book.

The gold loan mix still stands high at 48% of the book. Further, the process implementation and tightening of underwriting standard in the gold book also let to some moderation in the disbursements. The bank has also capped the LTV ratio below 75% in gold loans.

The SME loan growth of the bank has improved to 28% and the segment is well placed to contribute to the growth.

The bank started credit card business with two relationships in FY2024.

The bank has also slow down the unsecured business in Q3FY2024 which has stands at less than 5% of the loan book of the bank.

The credit cost has continued to remain negative, while the credit cost is unlikely to remain negative in FY2025 but would continue to remain low given low fresh slippages of loans.

Bank expects it would take another year to build a healthy CASA franchise.

The gold book share would remain high for next 2 years till the other business show pick-up in growth.

The bank expects to maintain the net interest margin at 5.5% for FY2024.

RoA is expected at 1.8-2% for FY2024 and 1.5-1.8% for FY2025.