CSB Bank Ltd: Share Analysis

Date: 10 Oct 2023

CSB Bank Ltd (CSB), established in 1920, has a predominantly strong presence in south India with a network of 454 branches. Over the period of FY17 to FY20, the bank undertook aggressive provisioning to recognise the bad loans and hence, its bottom line was in the red. As part of the revival plan, the bank had raised funds from a public offering (made in December 2019) to shore up its capital.

For a better part of FY21, the bank had been extremely selective on its lending portfolio and focused largely on expanding its Gold Loan business (which is 100% collateralised), leveraging the relaxation in the RBI’s LTV regulation. This not only helped revive profitability, but the loan book grew 21.6% YoY to Rs. 13,137 crores (9MFY21).

To sustain the recently discovered growth trend, the management has chalked out a retail driven growth strategy and a number of key appointments have been made. Mr. Pralay Mondal (ex- Axis Bank) has taken over as the president of the Retail & SME portfolio. We expect this new team to grow the retail (excluding Gold Loan) and SME books by CAGR of 44.6% and 17.7% to Rs. 7,283.2 crore and Rs. 3,914 crores, respectively, for the period FY20-FY23. The Gold Loan portfolio is expected to sustain a CAGR of 33.9% to Rs. 8,456.6 crores by FY23.  The corporate lending book is expected to remain flat at Rs. 3,179.5 crores. Overall, the advances are expected to grow at a CAGR of 26.2% to Rs. 22,833.3 crores over the same period.