CSBBANKNSEQ4 FY2025April 28, 2025

CSB Bank Limited

10,289words
76turns
12analyst exchanges
2executives
Management on call
B.K. Divakara Executive Director
CSB BANK
Satish Gundewar Chief Financial Officer
CSB BANK
Key numbers — 40 extracted
100 basis point
brought the G-Sec yield curve down. The money market curve and CD curve have moved down by 50 to 100 basis points during this period. The final LCR guidelines have smoothened the liquidity pressure. RBI has als
6.5%
ned the liquidity pressure. RBI has also lowered the growth expectation for the financial year to 6.5% from 6.7% earlier and have started to cut repo rates to boost the domestic consumption. Taking
6.7%
quidity pressure. RBI has also lowered the growth expectation for the financial year to 6.5% from 6.7% earlier and have started to cut repo rates to boost the domestic consumption. Taking a cue from
6.2%
e ongoing tariff war and consequent uncertainty, IMF and World Bank has lowered GDP estimation to 6.2% and 6.3%, respectively. We expect the liquidity condition to ease further and more reduction in p
6.3%
tariff war and consequent uncertainty, IMF and World Bank has lowered GDP estimation to 6.2% and 6.3%, respectively. We expect the liquidity condition to ease further and more reduction in policy rat
INR 594 crore
CSB specifics, let us start with profitability. The net profit for the full year FY '25 stood at INR 594 crores, which is 5% growth on a year-on-year basis and Q4 FY 25 on a stand-alone basis was at INR 190 c
5%
art with profitability. The net profit for the full year FY '25 stood at INR 594 crores, which is 5% growth on a year-on-year basis and Q4 FY 25 on a stand-alone basis was at INR 190 crores, which i
INR 190 crore
594 crores, which is 5% growth on a year-on-year basis and Q4 FY 25 on a stand-alone basis was at INR 190 crores, which is 26% growth vs Q4 FY 24. CSB Bank Limited April 28, 2025
26%
rowth on a year-on-year basis and Q4 FY 25 on a stand-alone basis was at INR 190 crores, which is 26% growth vs Q4 FY 24. CSB Bank Limited April 28, 2025 Operating pr
INR 910 crore
CSB Bank Limited April 28, 2025 Operating profit of the bank for full year is INR 910 crores and Q4 FY '25 is INR 317 crores with a growth of 17% and 39% on a FY and quarterly basis, respec
INR 317 crore
ed April 28, 2025 Operating profit of the bank for full year is INR 910 crores and Q4 FY '25 is INR 317 crores with a growth of 17% and 39% on a FY and quarterly basis, respectively. Other income registered
17%
ofit of the bank for full year is INR 910 crores and Q4 FY '25 is INR 317 crores with a growth of 17% and 39% on a FY and quarterly basis, respectively. Other income registered a 94% growth on a quar
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Guidance — 20 items
Pralay Mondal
opening
“We expect the liquidity condition to ease further and more reduction in policy rates is on the cards, in this financial year.”
Pralay Mondal
opening
“I'm sure there will be questions on this, and we will respond to them at the relevant point of time.”
Pralay Mondal
opening
“Building of the customer franchise journey will really start at the end of this tech transformation, which at best will be done in the next 3 to 6 months' time.”
Pralay Mondal
opening
“This will be a big year for us, and we'll be laying strong foundation for materializing our long-term goals.”
Pralay Mondal
opening
“We will strive to maintain our guidance on key parameters and endeavour to deliver consistently quarter-on-quarter.”
Suraj Das
qa
“It’s not that it is significant, but yes, it was slightly higher, and this will start coming down from next quarter onwards.”
Pralay Mondal
qa
“Our NIM for this quarter is 3.75%, and for the full next year, the guidance will be somewhere in between 3.75% and 4.00% and probably somewhere close to 4% is what will be there.”
Pralay Mondal
qa
“But I think that on a broad basis, we don't see any fee income coming down next year, if at all, we'll grow on top of this fee income quite handsomely.”
Pralay Mondal
qa
“On the asset side, our wholesale has taken off, our SME has taken off, our gold is doing well, our retail will take off this year after our core system migration and everything is scalable because all our systems will be place in the next 3 to 6 months.”
Pralay Mondal
qa
“Our constraint will be how much liability we can generate.”
Risks & concerns — 15 flagged
The final LCR guidelines have smoothened the liquidity pressure.
— Pralay Mondal
On the liquidity front, we could efficiently manage the liquidity risk.
— Pralay Mondal
Wholesale banking portfolio grew by 22% despite the impact of liquidation of almost the entire DA portfolio, which degrew by 89%.
— Pralay Mondal
We have a low proportion of risk-weighted assets compared to the industry.
— Pralay Mondal
Being a very risk averse kind of a bank, we didn't want to take liquidity risk.
— Suraj Das
This excess liquidity created some challenge for us in terms of margins.
— Suraj Das
The third is that we have decisively pulled back on various high-yielding businesses, like PL, Agri, MFI etc considering the systemic stress.
— Pralay Mondal
Because of that, we will be in a good place to say which is the franchise growth we want to have and from where we are getting higher risk-adjusted return, that's where we'll do business.
— Pralay Mondal
Hence, our ability to manage NIM and then get growth on deposits may not be that difficult.
— Pralay Mondal
Secondly, on the gold loan book, are you seeing any impact of the draft circular that has come up from?
— Mona Khetan
Broadly, we don't see too much of an impact of this on our business at this point of time, but we have to wait and watch for the final circular.
— Pralay Mondal
Lower LTV is good news because, with prices going up so much, we are not very comfortable in taking the risk of a high LTV on such a high price.
— Pralay Mondal
But the real reason for our NIM depletion has been because of the liquidity challenge, which was there in the ecosystem.
— Pralay Mondal
And sir, next question will be like what are the 2 to 3 key risk areas the management is most focused on mitigating it in FY '26?
— Rohit Priyadarshi
Second risk was liquidity risk, which is a bigger risk for a bank like us because we are a small bank and our ability to attract retail deposits is slightly lower compared to some of the larger banks.
— Pralay Mondal
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Q&A — 12 exchanges
Q
Thanks for the opportunity and congratulations on the good performance. I just had two questions.
Management
Q
Sir, two - three questions. First one is on the fee income. This quarter, the fee income has been very strong. If you can give some rationale and the sustainability of the same?
Pralay Mondal
You want to ask all the questions together or one by one. Okay. So that is one. The second one is on the slippages part, slippages again, I mean quarter-on- quarter has seen some uptick. Is this because of the MFI book? I think that book was minimal for you. CSB Bank Limited April 28, 2025 Thirdly, I think you were saying something in the opening remarks in terms of hedging and all. So, if you can explain that, I mean, what has been that thing? And is that the rationale behind your cost of funds increasing higher than the cost of deposit this full year? Pralay Mondal: Thanks for your questions
Q
Congrats on a good quarter. I just had a couple of questions. First was relating to the margin trajectory, some of that you explained in the earlier answer. But just directionally, how do you think margins move from here on for, let's say, the full year FY '26, and if you can give some qualitative comment about first half and second half, that would be useful. And the second one is on the fee income side, you talked about several factors driving the fee income delta last quarter to this quarter. If you could just sort of normalize it from a one-off that you called out. How much of this is sust
Pralay Mondal
Your first question was on NIM. In addition to what I said, our overall business mix is changing. The wholesale business has started picking up. While the total WSB book has grown by 22%, corporate loans grew by 44% on a standalone basis Incrementally, I just shared that from INR 900 crores of disbursement last quarter, this quarter, we have additionally disbursed almost equal amount or more. That is one impact. Of course, that helps in many other ways, including fees and other income, but it also does not help NIM necessarily. It helps cost to income also, but it doesn't help NIM, that's one.
Q
Firstly, again, just touching on the fee base. So, if I look at the fee income for full year at INR 972- - versus INR 584 crores or so last year. Could you share the breakup between processing fees, commission, first-party fees, forex profit? Could you just give for the full year perspective between this year and last year that would be very helpful?
Pralay Mondal
I don't think we share that level of details. Whatever we have, we have shared already with you. Beyond that, we don't give a breakup of how much is gold loan fee, how much is forex fee etc. I don't think we give that breakup. Do you give that, Satish? No, we don't give that detail. Okay. But any colour or in terms of how much is coming from corporate related fees that itself could help us understand. I just covered that in one of the previous questions in detail. But just to summarize it, overall, 21% CSB Bank Limited April 28, 2025 is our noninterest income to total income. Generally, what h
Q
Sir, first question is on the guidance on the credit cost trend. So, you mentioned that there were a couple of one-offs in Q4, and you also did some prudent provisioning. So, for FY '26, how should I look at the credit cost?
Pralay Mondal
I think if you look at our overall credit cost, it is somewhere around 29 basis points. We are keeping our credit cost guidance below 30 basis points for next year. We should be able to comfortably achieve this - is our view. Okay. And second question is on the other opex. So even that has gone up significantly, if you look at it in Q4 versus previous quarter as well as last year. So, I mean, if you can provide some colour as to how should I look at it for FY '26 and going forward? If we look at overall, our opex has been reasonably managed, but I think it is at 20% growth. Because of the sign
Q
A couple of questions from my end. Firstly, could you give some colour on the health of the unsecured book, which you talked about previously in terms of the asset quality and if you could - - you're expecting any more slippages from it in the coming quarters?
Pralay Mondal
Here, we have taken some prudent calls, and we are fortunate because now it's starting to taper down for us, primarily because the portfolio is degrowing. Throughout last year, we have been constantly degrowing the portfolio. We started this degrowth a year back. Currently, our overall retail unsecured book is around 3.3% of the overall book. Within that also, there is one portion which is credit cards, which while it comes as a credit cost, we are able to ensure that on a net ROA basis, we are neutral. From that perspective, I think while on a percentage basis, it might look high, but the boo
Q
Congratulations on the good set of numbers. Sir, 2 questions from my side. What is your medium term like 2 to 3 year target for maintaining the return on assets and return on equity?
Pralay Mondal
On return on assets, our guidance is between 1.5% to 1.8% and return on equity between 15% to 17%. RoA will be closer to 1.5% for the immediate 1 or 2 more quarters. This quarter, return on equity went up a little bit. But for the full year basis, we are slightly higher than 15%. Okay. And sir, next question will be like what are the 2 to 3 key risk areas the management is most focused on mitigating it in FY '26? One of the risks which is there in the ecosystem was this unsecured book. I think we have broadly mitigated it. Unsecured, including MFI and retail, we have broadly mitigated it - som
Q
Sir, my first question is on cost-to-income ratio. Cost-to-income ratio used to be 57%, 58% annual. CSB Bank Limited April 28, 2025 I'm talking about the annual number. It has moved up to 62% in last 2 years. So where do you see this number in FY '26 and FY '27? If you can give some view -- I understand that the technology capex is there and then maybe from second half of the year, it will taper down. I understand all of that. But if you can give some number, it will be very helpful. That is question number one. Question number two, is in terms of philosophy at the AUM level, where do you see
Pralay Mondal
Let me handle the first 2 first. These are more qualitative questions. Cost to income, I had always guided that till FY '27, it will be somewhere around 65%. Once the entire ecosystem of the banking gets built up around the core system transformation and other things we are doing, the whole franchise will start playing out. Very quickly between FY '27 to FY '30, the cost to income will go down to 50%. Hence the journey of cost to income from 65% or 62% to 50% will happen between FY '27 to FY '30. I have articulated this tapering in almost every call, every meeting, which I have with investors.
Q
Sir, I just had two questions. My first question was regarding liabilities. You had highlighted initially on the call that the main problem is not on the asset growth but is on the liability growth. This year, in FY '25, we increased branches by around 50. In this particular year, our bulk deposits as compared to total deposits has also increased from 33% to almost 43%. So, going ahead in the next 2, 3 years, what are you seeing -- what steps are you taking to increase your retail base to increase your customer acquisition strategy? That is my first question. And the second question was relate
Pralay Mondal
The second question I've answered in various ways, so I will keep it short. But let me answer the first question. It's a very good question. You're right. If you look at our branch distribution, currently, we have around 33-34% in Kerala. It was 52%, I think few years back. CSB Bank Limited April 28, 2025 What it means is that more and more branches we are building for the future. No longer we are building a branch, which will break even in 1 year, where we'll only do gold loans and those kinds of businesses. These branches are being built for the new transformational technology, products, pro
Q
So, my question was related to the corporate account that has slipped about a year ago. Any update on the recovery there? And what sort of provisions you hold against it?
Pralay Mondal
Unfortunately, it has gone into a little bit of a legal tangle right now and that's why we could not recover it. But we have a fair bit of assets out there, which is secured with us. Hence, we should be able to recover at some stage. Since it went into a little bit of a litigation at this point of time, we are going through the entire legal process at this point of time. Having said that, we have taken provision as per our Board guidelines, which is around 50% and we have taken a little bit more prudent provision against security deterioration etc as we thought that we'll be able to recover so
Q
Just a couple of questions, sir, before you enter from the build phase for scale phase, do you feel that any gaps exist in the top management? Or do you feel some gaps over there to get filled up? That's question number one. CSB Bank Limited April 28, 2025 And question number two, how do you ensure that you can get your liabilities to grow in excess of 25% when the systems deposit growth itself is very low. What kind of initiatives you are taking and how you ensure that on a sustainable basis to grow the balance sheet much significantly higher than the industry?
Pralay Mondal
On the management, we have no major gaps as of now. Every senior position starting from CXO level to CXO plus 1 to regional head to distribution head to product heads is in place. Further even on the wholesale, entire team is growing at a very rapid pace. The SME team is already in place. Transaction banking team is in place. Every team and every senior management are completely in place, and we don't have any attrition in the senior management. Of course, at an entry-level/ junior-level, there will be some attrition. That way, we are doing extremely well in my view. The team is very engaged i
Q
Thank you very much for your questions, and we look forward to our next meeting again after a quarter. Till then, hopefully, we should be able to do even better than what we have done this quarter. Thank you very much.
Management
Speaking time
Pralay Mondal
30
Moderator
14
Mona Khetan
7
Dhaval
5
Chirag Singhal
4
Chinmay Nema
3
Sagar Shah
3
Suraj Das
2
Satish Gundewar
2
Rohit Priyadarshi
2
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Opening remarks
Shivaji Thapliyal
Thank you Rutuja. Good evening and a warm welcome to all those who have joined the call. The CSB Bank's management is represented by; Mr. Pralay Mondal, Managing Director and CEO; Mr. B.K. Divakara, Executive Director and Mr. Satish Gundewar, Chief Financial Officer. We specifically thank the management of CSB Bank for giving YES Securities the opportunity to host their result call. The management will first be making some opening remarks, after which we will throw the floor open for questions. I now invite the management to make their opening remarks. Pralay, over to you.
Pralay Mondal
Thank you Shivaji and good afternoon, everybody. I will give a brief understanding of the global scenario and then quickly move on to CSB's specifics. Globally, I think all of we know that the uncertainties have risen significantly in the last one quarter. It is reflected in the movement of interest and currency rates and commodity prices. Bank of England and ECB have cut the policy rates and are likely to cut even further. However, FED may take a wait and watch stance for the time-being. The tariff negotiations are likely to impact global growth adversely and may become inflationary for the US as well. Indian economy is not insulated either from the global uncertainties and will also be impacted to a considerable extent. RBI has taken proactive steps in managing the liquidity. Banking system has remained in surplus liquidity since the last fortnight of March '25. A series of OMOs aided by benign inflation expectation has also brought the G-Sec yield curve down. The money market curve
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