CSB BANK - will it become next HDFC Bank?

Hi Friends,

This is my first attempt to share my analysis with you guys. I use to read this blog a lot and also follow a couple of great minds present over here. I would like to share my one of the favorite stock which I own in my PF (allocation of 10%). I will try to rationalize my analysis over here. Share your thoughts on this. Lets dive in but first pls note: I am not a registered advisor.

CSB Bank


  • It’s a century-old bank earlier known as Catholic Syrian Bank. Mainly serving Southern India.
  • Prem Watsa, Canadian Warren Buffett (he is the same person who bought Fairchem, IIFL, etc), had purchased around 50% capital in 2019 at an average cost of Rs.140 per share.
  • IPO came at a price of Rs.195/share. Oversubscribed and went to Rs.300 on the listing.
  • The new management started cleaning the Books which led to high write-offs and provisions.
  • Previously the employees were on the IBA pay scale, now started recruiting on a contractual basis which led to the hiring of 3 younger staff at the cost of 1 IBA staff.
  • Hired Pralay Mondal from Axis Bank.
  • Added a board member from PWC
  • Branch expansion began across geographies. Currently, there are around 450 branches and they are planning to take it to 1000 in 5 years.
  • Huge hiring from Axis Bank and Bajaj Finance was done to introduce new product lines e:g Bike loan, etc. as the bank was mainly in Gold/SME Loan.
  • Given VRS in this quarter to around 200 staff which will lead to an impact of Rs.80 crore in this quarter.
    This was an update to date. Now let’s look at financials. Unlike other companies, financial parameters for evaluating banks and NBFC/ FI are different. Let’s look at key parameters.
    Yield on Advances – Up from 10.72% to 10.98%
    Cost of Deposits - Down from 5.91% to 4.91%
    NIM – Up from 3.92% to 5.17% (However this might not sustain, it will be b/w 4-5%)
    Yield on investments – Up from 6.33% to 7.00%
    RoA (annualized) of 1.07%.as on 31/12/20

Total Deposits grew by 16% YoY
CASA ratio stood at 30.4% as on 31/12/20
Cost Income Ratio from 69.53% to 49.25%
Gross NPA decreased from Rs 387 Cr as on 30.09.2020 to Rs 235 Cr as on 31.12.2020.
Gross NPA as a percentage of advances is at 1.77% as on 31.12.2020 whereas it was 3.04% & 3.54% respectively on 30.09.2020 & 31.03.2020

Net NPA decreased from 164 Cr as on 30.09.2020 to Rs 89.5 Cr as on 31.12.2020
Net NPA as percentage of advances decreased from 1.30% as on 30.09.2020 & 1.91% as on 31.03.2020 to 0.68% as on 31.12.2020
Capital Adequacy Ratio improves from 19.69% as on 30.09.2020 to 21.02% as on 31.12.2020.
Leverage ratio is at 7.7% as on 31.12.2020.
Liquidity Coverage Ratio at 200%
Tier I ratio of 19.77%

This shows that the bank has a very strong balance sheet,
Management is also exploring acquiring a bank.
Below are the few snapshots of Presentation which shows that they have made provision in excess of RBI’s requirement which show conservative approach and a snapshot for future strategy.

Now the main part

The negatives and the positives

First the Negative aspect.

  • There is a risk of an increase in NPA once the moratorium lifts off. However, the bank has prudently provided provisions on that loans too (Rs.210.62 cr of loans are standard due to SC order as on 31.12.20 yet bank made provision of Rs.51 cr on these loans) Out of these loans, 62% loans are Gold loans hence the chances of getting NPA/write off is less.

  • bank’s NPAT in the last quarter was Rs.53 crore and in this quarter they are giving VRS to the tune of Rs.80 cr hence we might see loss/bare profit in this quarter.

  • Company is into full fledge expansion route hence there will be incremental expenses like staff cost, office setup cost, etc in the near future. Normally the cost of the branch begins on the date of setup whereas it takes little time to turn it into profit. So the benefits of expansions will be reflected after say 6-12 months.

  • This quarter might see less income from investment as yields have risen sharply thereby M2M profit will reduce.

Now the positive aspects

  • It is a very small bank with Mcap of just Rs.4500 crore and is doing all the right things to grow. Branch expansion lead by new management will surely take it to another level.

  • It had leadership in Gold Loans whereas now a new team with domain expertise will launch new products. Thus with the increase in branches and new products launching, we may expect a good jump in top line and bottom line in near future.

  • It has an extremely good balance sheet and adequately capitalized thereby can withstand any unforeseen circumstances and also there are possibilities of inorganic expansion.

  • Thus fundamentally it is very well placed but right now, u can say, it is in the gestation period.

Thank you for reading. Please share your views.


Crisil elaborated the present situation nicely.

Not an upgrade but definitely a step towards that.

CSB Rating by CRISIL

OMG simply look at the pace at which they are opening branches.

on 26 March they opened the 89th branch in the current FY and in just 4 days they opened the 101st branch. This clearly demonstrates 2 things.

  1. their commitment to open 100 branches per year
  2. They are setting a base on which they are going to launch and sell new credit products.

Super agressive.

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There are 30 Indian Banks in the Forbes World’s Best Banks 2021 and CSB is one of them. This certainly increases my conviction even more.

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Made a small effort to analyse CSB Bank.

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ICICI Direct came out with a buy recommendation on CSB. They are expecting profit to double in next two years.
IDirect_CSBBank_StockTales.pdf (1.4 MB)

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Think of it as a journey. The company had around 400+ branches till Dec 2020. They added 100+ in the march quarter and would probably add 200+ in this year. Avg Breakeven time is 1 to 1.5 yr. so in next 2 years, branches would jump from 400+ to 700+ which will surely increase the bottom line unless they recklessly lend which they haven’t been doing.

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CSB has come out with updates. Total deposits have gone up by 15%, whereas CASA has gone up by almost 30%. Now CASA comprises almost 33% of the deposits.
Total advances have gone up by 24%, whereas advances against gold have gone up by 46%.
CSB Updates.pdf (1.3 MB)


Hi Rajesh, Yes they do have increased the CASA ratio but their Gross Adv remained stable, and in fact Gold loan exposure reduced. If you witness other gold loan companies then we have seen an increase in write-offs. So we might see an increase in NPA along with an increase in cost due to branch expansion whereas profits won’t increase dramatically as advances are stable. Let’s see how it pans out.


Q1 FY22 result declared.

Spike in GNPA & NNPA by >2% each due to wave 2. Rest all metrics decent to okay.

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Understand that Mannapuram finance has accepted in their annual report that they are losing market share in GOLD LOAN to CSB bank.

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BTW , could anybody please share the first hand or hearsay on the banking experience with the CSB bank. Particularly about their online banking platform.

Could you share page number in Mannapuram finance AR or take a snap shot of the AR mentioning this?


Can you share the source ?

Decent Q2 Results

sold off post good result is not a good sign, Is there any hidden reason ? i guess the growth in NII is only 12% could be the reason as management guided 25% CAGR growth but net profits they achieved 25% growth.
Interesting to see how markets reach tomorrow. Results looks good btw.

There is this news regarding wage hikes & employee union in CSB. There was another instance relating to Kitex in recent past where the management eventually decided to expand in Telangana instead of Kerala.

The communist govt is here to stay & I think these problems will get sticky, So I decided and sold off my CSB holdings after this news as I do not see these problems going away anytime soon as the govt will support the unions eventually. I also have Bandhan in my PF which has navigated this problem better overall than CSB as it was a pvt bank from the start. I did not want overexposure of a similar problem in two of my holdings.

Although, State govt don’t have much say in wages etc of a (now) pvt. bank and the future outlook for the bank will be good going forward given the improving financials and capex cycle, but the majority part of this business is going to stay in Kerala and I don’t think this problem is a one off which can go away by just one wage hike.