Is anyone know why they stopped paying Dividends even after having repeated profits from last couple of year?
Seems this bank is technological very far behind from the competitors by going through many customers review feedback.
Some can be found below:
Happy Investing,
Karthik
Disclosure: Not having any exposure to this counter. Tacking this Bank with DCB Bank due to good valuations
Private sector lender CSB Bank on Friday reported a 10 per cent rise in net profit at Rs 133 crore in the second quarter ended September 2023 as bad loans declined. The Kerala-based bank had posted a net profit of Rs 121 crore in the year-ago period.
Total income rose to Rs 836 crore from Rs 600 crore in the same period a year ago, CSB Bank said in a regulatory filing. During the quarter, the bank earned interest income of Rs 687 crore as compared to Rs 555 crore in the same period a year ago.
On the asset quality side, the bank witnessed improvement with gross non-performing assets (NPAs) fell to 1.27 per cent of gross advances by the end of September 2023 from 1.65 per cent a year ago. Net NPAs too declined to 0.33 per cent from 0.57 per cent in the same quarter a year ago.
Earlier there was a regulatory restriction. However, this should not be an issue now. Had asked the management, waiting for their response
Fairfax is ready for an āall-cashā deal to acquire IDBI Bank.
Kerala - 30%
Tamil Nadu - 29%
Maharashtra - 23%
Karnataka - 5%
Others - 14%
Recent partnership with Jupiter (5M playstore downloads) shows intent in the areas of modernization
On the other hand, CSB bankās own apps look lackluster.
Thanks for the reply!
I did some more digging into CSB bank. I think I have identified one clear moat which has also been their growth engine for the last 6 years: gold loans. Since 2019, CSBās gold loan book has grown 32% CAGR - going from 26% of their loan book to 48% at the end of Q4 2024. They have been able to do this, as they charge only around 9.5%~12% interest for these loans vs. Muthoot / Manappuram (the largest gold loan players) who charge 20%~25% interest. I think they charge less interest because they lend to more safe customers than Muthoot. This can be seen via their NPA ratios: CSB has 0.5% NNPA vs. Muthoot at 3% (meaning 6x more defaults at Muthoot). CSBās gold loan book at ā¹118Bn is 16% of Muthoot, who is at ā¹729Bn. CSBās moat here is low interest rates combined with being a trusted bank with a good branch network in Kerala and TN (seen below) - so people are not wary of trusting CSB to hold their gold safe.
Pralay Mondal (CSBās MD & CEO) is cautious about gold loan growth. My guess is that the pool of safe customers for gold loans is limited. So, I donāt expect them to ever reach the scale of Muthoot / Manappuram. Mr Mondal also mentions that he expects āwholesaleā and SME business to grow faster next year (which can be seen already from Q4 2023 to Q4 2024). Gold loans have a higher NIM and lower net NPA than Wholesale & SME Loans, so these will potentially both be impacted if gold loan share of total loan book reduces. Link to the interview.
However, if they manage to maintain their NIM at 4%~5%, I donāt see a reason for concern. For comparison: HDFC, ICICI and Kotak have NIMs of 3.6%, 4.4% and 5.3% respectively, while Muthoot and Mannapuram have NIMs of 11.6% and 15%. I double whether the latter is sustainable long-term, especially when loan customers get more internet savvy and are able to compare loan interest rates across banks/NBFCs.
In summary, CSB seems to be a promising bank , which will grow at 10%~15%+ in the next few years, as India is still very credit-starved and more people will move up the wealth pyramid from low-income to the aspirational / middle-class.
Gold loans vs. overall loan book:
Retail and SME is growing faster than gold loans:
Branches:
Disc: Have decided to start a small position and will monitor this stock in the coming quarters.
Thanks,
Sharad
OpenSourceInvestor @ Substack
Where everyone was panicking about the asset quality CSB Bank stood out for me, as being a small bank, it improved its asset quality this quarter and in my opinion is one of the best among small banks. Though there could be cockroaches that may unearth themselves going forward. Some highlights
Asset Quality:
GNPA & NNPA Ratios: Lower than the September quarter. GNPA was at 1.58%, and NNPA was at 0.64%, compared to 1.68% and 0.69% in Q2 FY25, respectively. This indicates an improvement in asset quality compared to the previous quarter, with a reduction in bad loans.
Provision Coverage Ratio (PCR): Increased to 60.12% without PWO. The bank aims to increase this to 70%. The bank also holds a provisioning buffer of approximately ā¹181 crores, above regulatory requirements.
Asset Growth:
Net Advance Growth: Increased by 26% YoY, more than twice the industry growth of 12%. This demonstrates a significant increase in lending activity.
Gold Portfolio: Registered a growth of 36% YoY. This is a strong area of growth for the bank.
Other Retail: Grew by 32% YoY. This demonstrates strong growth in the retail sector.
SME Growth: Increased by 29% YoY. This indicates a stable growth in the SME sector.
Core Corporate Book: Recorded growth of over 30%. This shows the bank is growing its core corporate business.
Overall WSB Growth: Increased by 5% mainly due to the liquidation of the DA portfolio and few exits.
*The bank has added 34 new branches and merged 6 during the year, bringing the total to 807 branches and 777 ATMs
*The bank has been slowing growth in unsecured loans and MFI, which has led to lower NPA ratios
The result were good talk to their conservative lending and good strategy to build a lasting franchise. It is not going to be easy but if they walk the talk then we can have a winner. But as guided by management they will have compressions in margins and profits is not the focus for next 3 years. They are following customer life cycle
CSB Bank posted a strong ~30% loan book growth this quarter, well ahead of peers like IDFC First or DCB which are running at ~20%. Thatās a clear positive and shows the franchise is pushing growth aggressively.
That said, the quality of earnings looks a bit mixed. Provisions have shot up ~3x, which is concerning, and PAT growth was muted at just ~4%. Most of the bottom-line support this quarter has come from other income, while core profitability was weighed down by higher credit costs.
Earnings Print :-
The bank is in the middle of a big transformation phase ā moving from a Kerala-centric gold-loan heavy book to a more diversified, pan-India franchise. This means higher opex and branch expansion in the near term, similar to where IDFC was about three years ago.
On the positives, the gold loan book has delivered very strong growth, which remains the key trigger here. Likely the reason why some AIFs have started building positions in the stock.
Overall, the quarter feels āokay-ishā ā good loan growth, strong gold traction, but profits dampened by higher provisions. Itās a transition story, and the real compounding will depend on how quickly CSB can stabilize asset quality and scale beyond its gold-loan comfort zone.
Tech Transformation: Migrated to new CBS (Flexcube) + 50+ systems live ā foundation for scaling.
CSB : RoA guidance is 1.5% as Q1 is weak and till Q4 they are going to achieve this RoA
1 more Rate cut is important for them.
EBLR + T-Bill linked loans: ~17% of loan book.
MCLR-linked loans: ~20%.
Fixed-rate loans: ~60%.
In banking during rate cut times - u have to see the fixed rate pf.
Most of CSBās book is fixed-rate (stable yields ). So if RBI cuts rates, only 17% + 20% (~37%) of book will reprice lower immediately, while fixed 60% protects earnings .
Why does one need to give gold loans to safe customers? A yield of 15 perc+ would indeed be better then 11 perc as gold loans are very safe in nature. Gold is very very rarely going to have a 25 perc drawdown.
CSB is on right track. It cheap valuation may be due to overhang of merger with idbi bank.
Looks like in October we will have some updates.
Q2FY26 coming on 5th Novemeberā¦ Waiting to seeā¦Does topline increase move to bottomline?
Super result this timeā¦income and profit on super rise with bad loans under control. NIM and ROA also started to improve. Hope CASA will also gradually increase over years.
Worth watching this video.
