Ladies and gentlemen, good day and welcome to CSB Bank Limited earnings call for Q2
FY2027 financial results hosted by Yes Securities Limited. Please note that all participant
lines will be in the listen-only mode and there will be an opportunity for you to ask
questions after the presentation concludes. Please note that this conference is being
recorded. With that, I hand over the call to Mr. Shivaji Thapliyal from Yes Securities.
Thank you and over to you, sir.
Shivaji Thapliyal:
Thank you Swapnil. Good evening and a warm welcome to all those who have joined the
call. The CSB Bank 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. Thank you, everybody, for joining our call for Q2 FY2027. Let me start
by wishing everybody Happy Diwali in advance.
On the macroeconomic side, especially in the banking landscape, the global environment
continues to be uncertain. Financial market volatility and geopolitical uncertainties continue
to persist. Global growth is revised upwards to 3.1% for 2026 and 3.4% in 2027, with
stagflation risk continuing to remain a possibility. Global inflation is also projected to move
upwards to 4.7%. Mid-term elections in the US and some agreement on ceasefire with Iran
will decide the future course in energy prices and global growth.
On the domestic front, RBI has revised upwards India's GDP growth to 7.1%, along with
several other global agencies like ADB and IMF. India continues to be one of the fastest
growing major economies in the world and is outperforming global peers. The major
setback to the Indian economy this year is rising crude prices, which put pressure on INR
and domestic rates. Central Bank has brought currency situation under control by opening
the FCNR swap window for banks on NRI deposits and have raised repo rates to contain
inflation. The excess liquidity that persisted in the system due to FCNR deposits is
gradually getting neutralized .
On the growth outlook, the economic outlook for India remains positive. The resilience in
Indian economy is largely due to robust domestic demand, government infra-spending and
steady service sector, even as global geopolitical and trade headwinds continue to pose
external risks. India remains the fastest-growing economy in the world despite facing
exceptionally high crude oil prices. The growth outlook remains robust, however, continued
conflict in Gulf and second-order impact of El Niño may knock off few basis points in the
coming quarters. Monetary, regulatory, and fiscal policies remain aligned with the growth
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objectives, with RBI projecting a real GDP growth of 7.1% and CPI inflation expectation of
5.2% in FY2026-27.
Coming to CSB specifics, overall, we had a fairly good quarter. On the profitability side,
net profit stood at Rs.183 Crores for Q2 FY2027, with a sequential growth of 22% and Y-oY growth of 14% over Q2 FY2026. Operating profit of the bank grew sequentially by 10%
and stood at Rs.276 Crores for Q2 FY2027. Net interest income stood at Rs.510 Crores for
Q2 FY2027, growing by 7% Q-on-Q and 20% on a Y-o-Y basis. Other income grew
sequentially by 20% over Q1 FY2027, while other income excluding treasury profit grew
by 27%. Cost to income ratio for Q2 FY2027 stood at 64.8%. NIM for Q2 stood at 3.81%,
as against 3.66% for Q1 FY2027 and 3.81% for Q2 FY2026. ROA for the quarter ended
30th September 2026 stood at 1.29% as against 1.09% for Q1 FY2027. Contingency
provisions are held intact and bank is continuing with accelerated loan provisioning policy,
which will aid the bank in transitioning towards the ECL framework.
On the liability side, deposits recorded a strong Y-o-Y growth of 18%, CASA ratio stood
just short of 19% - at 18.96%. To aid the liquidity, we also availed both domestic and FCY
borrowings based on cost and tenor considerations. The liquidity risk was well managed.
CD ratio stood at 90.39%. Average LCR for the quarter is 127%. NSFR ratio at 124%. On
the asset growth, gross advances registered a Y-o-Y growth of 22%. Yield on advances for
Q2 FY2027 stood at 10.92% as against 10.65% in Q1 FY2027.
Asset quality metrices looked pretty good. The GNPA and NNPA ratios for the quarter
stood at 1.58% and 0.33% respectively. PCR now stands at 87.65% with PWO and 79.19%
without PWO. Bank is holding a provisioning buffer of around Rs.177 Crores over and
above the regulatory requirements. On the capital side, CRAR continued to be well above
the regulatory requirement and stood at 19.55%. Tier 1 ratio stood at 18.54%. Proportion of
risk-weighted assets continued to be lower compared to the industry. On the shareholder
value creation, book value per share stands at Rs.290. EPS for Q2 FY2027 stood at Rs.42 as
against Rs.35 for Q1 FY2027. ROE for the quarter improved from 12.71% Q1 FY 2027 to
14.74% in Q2 FY2027. Talking of distribution, we have a network of 872 branches and 844
ATMs as at September end 2026.
In conclusion, we believe that we delivered healthy growth across our key business metrices
during this quarter, reflecting sustained business momentum. Deposits grew by 18%, while
advances registered 22% growth YoY. Our liquidity profile remained comfortable with
average LCR of 127% and NSFR of 124%. We continued to optimize our cost of funds
through a balanced mix of deposits, borrowings, foreign currency borrowings, certificate of
deposits and other funding sources like refinance, etc, while maintaining an optimal liability
tenor profile.
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On the asset side, we achieved healthy momentum across gold and corporate segments with
Y-o-Y growth of 36% and 44% respectively. Growth in the SME segment remained
moderate as we continued to adopt a calibrated and cautious approach. We will start seeing
the growth on the SME side from this quarter onwards because most of the portfolio-related
issues we faced in SME book for the last one-and-a-half years have been by and large
corrected now. Growth in retail portfolio, excluding gold, was driven mainly from secured
or income-generating assets, while we chose to degrow on loan against security, which is
primarily loan against gold for the repledger businesses, which as per regulation, we have
effectively stopped and it has almost zeroized now. On the unsecured book like cards, Agri,
MFI, etc., due to regulatory and other risk considerations we have remained cautious.
Effective management of funding costs and asset yields enabled us to improve our net
interest margin to 3.81% from 3.66% in Q1 FY2027. As I said before, the wholesale
banking momentum is picking up well across all the three segments, but I will talk about it
a little later.
From a profitability perspective, our performance remained strong with net profit growing
by 14% compared to Q2 FY2026. Net interest income recorded a healthy growth of 20%
over Q2 FY2026. Asset quality remains stable and key metrices continued to be strong and
well within our stated guidance. The efforts undertaken during the Sustain-and Build phases
of our SBS 2030 journey have established a solid foundation aligned with our long-term
vision. Our focus is now to expand our geographical footprint and deepen relationships
across customer segments, including Retail, MSME and Corporates. In fact, over the last
two years we have built distribution in slightly larger markets, especially in North, West,
South, and partially we have started expanding in east as it is a good liability base to work
on. Across our businesses, some of the metro markets have started showing the growth
momentum, particularly after the completion of the core system upgrade and the technology
development and transformation exercise. Still, some more developments are going on out
there on the technology side, on the transaction banking side, and some of the other
advanced digital framework, which I will talk about later as the questions come. We believe
that the investments, which went into the metro and urban markets over the last few years,
are starting to pay off, and now it is already evident as the jaws are opening in these
markets well, both in terms of deposits and advances . Within retail banking, our focus will
be on customer acquisition, especially on the liability side, and building a profitable
granular franchise. Our retail asset portfolio strategy will remain centered on maintaining a
balanced lending book, with a greater emphasis on secured/income-generating
assets/collateral-backed products. Growth in unsecured lending will be calibrated and
largely limited to well underwritten existing customers, leveraging strong internal behavior
insights and data analytics. We won’t rush into this till we build the liability franchise well,
which has just started and momentum is picking up. On the back of cross-sell, the
unsecured part of the retail business will start probably by FY2028 onwards.
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On the corporate banking side, as I said before, we will continue to deepen our engagement
with large corporates and conglomerates through relationship-led coverage, complemented
by sector-focused banking solutions. This will be driven through a corridor-based approach,
with a strong emphasis on India’s key economic clusters. The good part is in WSB, three
segments are there - Corporate banking, Mid-market and FIPS - financial institutions.
Broadly, all these segments are contributing almost equally which was our objective.
Corporate banking and mid-market segments are growing faster and hence we believe that
we will have a right balance within the corporate segment. With transaction banking now
playing a large role with all the systems and solutions falling in place, we see a large play in
corporate banking, also leading to mainstreaming in SME and other businesses as well.
For MSME business, with the operating structure, leadership team, and business capabilities
now in place, and with our portfolio under control from a quality perspective, we are well
positioned to accelerate growth and capitalize on emerging opportunities at the right time,
which we will start seeing from this quarter.
We will continue to invest in distribution, technology, digital capabilities, and product
innovation to enhance customer relevance, responsiveness, and overall experience. This
phase is not only about accelerating growth, but also about ensuring that growth remains
disciplined, sustainable, and aligned with our strategic aspiration of becoming a leading
mid-sized bank with a strong pan-India presence. The tremendous success we had in our
technology transformation journey - which we did 18 months back, is starting to pay off.
Now we can dream of scaling the bank to the mid-sector on the back of the technology and
the leadership team which we have built up. With foundations firmly in place now, our
focus is on delivering consistent outcomes and creating long-term value through sustainable
and profitable growth. We are optimistic. The leadership team is excited and looking
forward to the next two to three years as this is what we have been waiting for so far, and
hope that going forward, each quarter we will see the delivery much faster with more
ambitious kind of a growth. With that, I end my initial remarks, and I will leave it open for
questions. Thank you very much.
Moderator:
Thank you so much, sir. We will take our first question from Akshat Agrawal of Nirmal
Bang Institutional Equities.
Akshat Agrawal:
Sir, thank you for the opportunity. If you can provide some color on sequential increase in
other opex by 18% Q-o-Q. Is it just seasonal or is there something else over there? Just
trying to figure it out. Thank you.
Pralay Mondal:
On the opex, overall increase is around 11% Q-o-Q and Y-o-Y is around 3%.
Akshat Agrawal:
But on the other opex, the 18% Q-o-Q, where is it coming from?
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Pralay Mondal:
Large part comes from technology because we have heavily invested in technology, .
Technology is one of the biggest drivers, and obviously we are expanding our distribution
and some of the infrastructure related spends also happened, so that is also increasing some
of the costs. Those are broadly the large items. On the staff cost, increase is around 17% Yo-Y. Primarily the opex is on the technology, staff, and infrastructure.
Akshat Agrawal:
Thanks for that, sir. My second question is on fee income. It has a strong sequential pickup.
If possible, if you can provide some breakup and reasons for the strong growth, and how
should we see it going forward.
Pralay Mondal:
On fee, what has happened is our core fee businesses have done extremely well in terms of
whether it is bancassurance, processing fee etc. Almost all the fee lines have run extremely
well. Core fee grew by around 27% Y-o-Y, while non-core fee lines like PSLC and treasury
etc- which is primarily market linked, have de-grown. This led to an overall fee degrowth of
around 22% Y-o-Y. But we have grown by around 20% Q-on-Q. Last year I had said that
there was a one-off and our fee income was around 23% of total income, above the guided
range. We always have maintained that we will have a core fee somewhere between 14% to
15% whereas overall fee will be somewhere around 17% to 18%. As we talk, we are just
short of 15% on core fee and just short of 17% on overall fee. We are broadly in line, even
at a time when the bond yields have touched unprecedented levels. Hopefully, we will be
able to sustain our fee income growth, as it is granular and detailed.
Akshat Agrawal:
. Thanks a lot. All the best, sir.
Pralay Mondal:
Thank you, Akshat. Thank you for your question.
Moderator:
Thank you. We will take our next question now. We have Parth Gutka of 360 One Capital.
Parth, please go ahead.
Parth Gutka:
Thanks a lot for the opportunity. My first question is, sir, what led to the sharp
improvement in the yield on advances for the quarter?
Pralay Mondal:
Two things happened, actually. One is our asset quality improved, and that helped to some
extent on the yield side. We were careful in terms of managing the yields, both across
wholesale as well as the SME businesses. Gold yields also did pretty well for us. Our cost
of funds has remained the same on a quarter-on-quarter basis and we managed the yield and
quality of portfolio. All these factors combined helped us in managing our NIM better.
Parth Gutka:
Thanks a lot, sir. My second question is, again, as you alluded to the fact that gold yields
have just increased by roughly 50-bps on a quarter-on-quarter basis. Anything to highlight
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here? As far as the disclosure goes, I think this is the highest we have done in the last six to
seven quarters.
Pralay Mondal:
We have opportunities there because we understand this business well. Elasticity on the
gold yield, we decided to try and improve leveraging our large distribution. We are in
various locations including deeper geographies. Given that and given the yields offered by
some of the competition institutions, whether it is banks or non-banks, we significantly had
opportunity there. We used that opportunity to improve the yield a little bit better. Let us
see how elastic it is. We are pretty good on the gold yield at this point of time. Whatever we
have done, it has helped us. We took a smart move this quarter.
Parth Gutka:
Sure, sir. Thanks a lot, sir.
Moderator:
Thank you, Parth. We will move to our next participant. We have Rishabh Jogani of Dolat
Capital. Rishabh, please go ahead.
Rishabh Jogani:
Okay. I have three questions. First is breakup of other income. Can you give that? Second
one, other expenses were higher. I know you have explained it as related to tech expenses,
but I was seeing that whenever our other income is high, the expenses are also high. Is there
any relation to it? Third is, this quarter, there were elevated write-offs. Anything
attributable to it? Our credit cost was low, but the write-offs were high.
Pralay Mondal:
Thanks, Rishabh, for your question. On the other income, I have given a detailed response,
so there is nothing more to add. On the other expenses, again - I have given a detailed
response. Coming to the third question, which is write-off. Yes, we had a fully provisioned
vintage book on the credit cards and on the unsecured side. As you know that on the
unsecured side, chances of recovery are low after a certain vintage where we have already
made provisions. Further we are not even getting any benefits against that, they are not even
PSL book. Hence, we decided to write it off. It has no impact on the credit cost We are
happy with the 24-basis points kind of a credit cost, which we achieved this quarter. The
quality of the entire portfolio is looking good. This shows that we are hopefully on a glide
path on our guided GNPA, NNPA, credit costs and slippage numbers. Even slippage
number net of upgrades and recovery was quite good. Overall, it was a good quarter. Writeoff being more of technical nature - it has little impact on the credit cost.
Rishabh Jogani:
Okay, sir. But our PCR has improved, so our credit cost was low, our write-offs were more,
but PCR has improved. If the fully provided book is written off, our PCR should go down,
and it has improved.
Pralay Mondal:
Recoveries were quite good. We have made some additional provisions in some of the cases
where we could have taken a call either way on prudent lines
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Rishabh Jogani:
Okay. Thanks.
Moderator:
Thank you, Rishabh. We have Mr. Shivaji Thapliyal. Sir, please go ahead.
Shivaji Thapliyal:
Thank you for the opportunity. The first question that I would like to ask is with regard to
balance sheet growth. I think one of the actionable has been the buildup of retail deposits,
and I think the technology has been put in place for that. What are some of the early signs
with regard to that and what does that imply for loan growth for this year and beyond that
on a steady state basis? That is the first question. Secondly, on the fee income aspect, would
you like to make any comments with regard to the IRDAI consultation paper in terms of
any long-term mitigating approaches that the bank may adopt, or what will it really mean
for corporate agents in the long run? Thirdly, from an asset quality perspective, after a
temporary wobble a few quarters ago, the bank seems to have settled down once again.
What is the kind of credit cost that we are looking at for this year as a whole, and then on a
steady state basis beyond this year? These would be my three questions. Thank you.
Pralay Mondal:
Thanks, Shivaji, for your questions and fairly detailed questions. Let me try and address. On
the balance sheet growth side, we have said that we will grow faster than the system, and
we have continued that. This quarter, of course, because of the FCNR (B) and related
opportunities, the overall ecosystem has grown a little faster. We were not a large player in
FCNR (B), and we did not have those leverage opportunities that many other players have.
To that extent, for us, it is pure, while we did some FCNR, but that is not something to talk
about. Ours is mostly organic normal growth, which we continue to do. To that extent, the
growth will sustain and it is not just a quarter or a half year phenomenon. More important
thing is how to build the franchise, and that is why we invested heavily in technology,
distribution, people and leadership. Technology, if I briefly talk about it, we have invested
in three, four parts. One is basically running the bank and building the bank. Secondly,
creating the digital infrastructure. Thirdly, we are building lot of capabilities on the back of
our ServiceNow platform through the in-house teams , which is helping us in taking lesser
incremental costs. Fourthly, on the customer experience side, on the TBG side, whether it
is supply chain, CMS, or trade, on the OBDX, on the corporate net banking, on corporate
LOS, all these developments are happening. OFSAA is just getting implemented as we are
talking. There is a tremendous amount of capability which we have built now in technology,
which needs to be leveraged.
The next question is how to leverage and get businesses out of it. Retail, I will measure it by
how we are building the customer base over a period of time. Finally, your question about
the loan growth on the retail side will depend on the number of liability customers we’ll get
into our ecosystem, because that is where the cross-sell will happen. All of these are getting
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in place. We have created VRM, i.e., Virtual Relationship Management team and we have
created a large infrastructure in terms of how we service our customers in our Turbhe
office. We just completed our DC DR switch seamlessly. These things were unimaginable
in this bank few years back or even few quarters back.
Given all this, we are now ready to launch the bank in its true sense in the scale phase, and
we will start seeing retail growth as well. Not immediately on the balance sheet side, but
first on the customer side. To be more specific, we are starting first on the current account
side because our mandate for the team is launching 3-4 products on the retail side, on the
liability side every quarter. In the last two quarters, we have launched new products and
have seen some initial success in that. We are focusing on current account acquisitions right
now, and gradually we will build that story on the savings account acquisition as well. On
the loan growth, we are growing reasonably well. While we had a muted growth on the
SME side for some time, it will start contributing from this quarter onwards. Wholesale is
growing well for us and we see quality growth. Gold loans continue to grow reasonably
well, though we are not growing as much as we have been doing before. Now we have all
the fee levers in place, and we are not just a single trick pony from that perspective. Given
all this, we will have more balanced growth across all the franchise, which is really about
building a proper bank.
On the fee income side, it is a question which we have to answer gradually. We have to see
how it plays out, because it is still a discussion paper at this point and final guidelines have
not come yet. But indications or direction, it is very clear. However, the advantage of being
a full-scale bank with a universal banking license, and having all this technology and other
capabilities in place, is that we are not dependent on just one business here or one fee
product there. Banks have this advantage, because they hold the customers. Eventually,
even if there are few percentage drops that happen on the fee income side, on the insurance,
if it is good for the customer, there will be other avenues which will open up. Hence, even if
the guidelines come exactly as outlined in the draft guidelines, there will be a bit of a
challenge in the short term for the insurance industry, the banking industry, and corporate
agents from a fee income perspective. But we are small, so to that extent, navigating the
ship is a little easier for us. We believe we have shown the flexibility to do that.
Will it be that material? For us, the answer is no, but we need to navigate it a little better,
understand this and figure out. I do not think this will impact much, at best half a percent or
1% here and there in terms of overall fee income to total income. If we say 18% is the
guidance, maybe it will come down to 17%, and then we will figure out how to take it back
to 18%. At the same time, if the bond yield starts coming down at some stage, we are sitting
on large AFS book, which should also help us with some non-core fee income on that side.
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Banking ecosystem is like that. You lose some, you gain some, and overall it remains in a
range.
On asset quality, I am happy that we have started showing improvement not just in one
metric, but across the board, whether it is slippages, recoveries and upgrades, gross NPA,
net NPA, or credit cost. Whichever way I look at it, every vector is looking good. I
understand that people would like to see this trend continue for the next two to three
quarters to believe that this is not a one-off. We will demonstrate that it is not a one-off in
the next two to three quarters because our SMA book is looking better in most businesses.
Gold loans have traditionally had a large SMA book, which does not lead to any credit loss.
Excluding gold loans, our SMA book is declining, which gives me confidence that asset
quality trends will continue to improve. I hope I have answered all your questions. Thank
you.
Shivaji Thapliyal:
Thank you.
Moderator:
Thank you so much. We will take our next question now. We have Navneet Bhaiya, who is
an individual investor. Mr. Navneet, please go ahead.
Navneet Bhaiya:
Good evening, sir. I hope I am audible.
Moderator:
Yes, please.
Navneet Bhaiya:
Good evening, Pralay. My question was, further to deliberate on the balance sheet growth.
In your build and sustain phase that you had completed in FY2026, the balance sheet of the
bank was still growing quite reasonably. In fact, I checked it from a sequential basis. On an
average, it was growing at about 5% to 6% for 12 quarters in a row. Now that you are in
your scale phase, do you see this growth accelerating over what you did in your build phase
or, how is the growth going to be different from what you did in your build phase?
Pralay Mondal:
Navneet Bhaiya:
Sure. Is that the only question? Then I will respond.
Yes. This is one. I saw your disbursements in this quarter. It was lower than what you did
in the same quarter last year. Your CASA percentage has also gone lower than what you did
in the last year. I was just trying to get my expectations right in terms of what are we trying
to achieve in our scale phase. Is it going to be faster overall? When would the numbers also
start reflecting what we are trying to achieve in this phase?
Pralay Mondal:
Now I got the perspective, so let me respond. Let me answer the second part first, then I
will move to the first question because these are related. If you broadly see on the
disbursement side, wholesale is there, SME is there, retail is there, and gold is there. These
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are the four verticals primarily we are talking about disbursements. Retail, we have not
really taken off yet because we will do it only once the liability side of the franchise grows,
and that is where we are putting a lot of hard work. Now that we have the technology, we
are launching products, we will build that, and hence that part will happen only after that.
Otherwise, we are unnecessarily building a risky portfolio, which we do not want to do.
Wholesale disbursements have done well, but of course, wholesale will always have some
quarters with more chunky disbursements and some quarters that are leaner, as some of
these businesses move from quarter to quarter. Broadly, they are doing extremely well on
both disbursements and growth. Though SME disbursements were there, the growth was
flattish as we also had some run-offs as well as some exits based on a detailed analysis of
the SME portfolio from a quality perspective. As we had some issues last year, we created
an exit list and exited a number of customers. We also lost some customers because of the
rates they were asking for, which we could not match. To that extent, while we disbursed,
we also lost some customers, which is why the SME portfolio did not grow as much.
What has really changed and moved the needle is gold loan disbursements. Previously, if
your portfolio was around ₹19,000 crore, we would disburse around ₹16,000 crore because
customers would rebook loans for various reasons, and that would be shown as a new
disbursement. As a result of price dip and regulatory changes, you are seeing disbursements
are naturally coming down quite a bit, although we are still growing the gold loan portfolio
by around 36%.
Having said that, we have also taken a conscious call to slow down, given that apart from
wholesale, SME is also expected to grow, and eventually retail will pick up as well. We
need to maintain a reasonable mix. Based on our Board's guidance, we have decided that by
the end of this year, the gold loan book should be around 50% of our overall mix. Last year,
it ended at around 53%, and even last quarter it was 54%. We can bring this down to around
50% without impacting ROA, ROE, or any other financial parameters. This will help us
create a more balanced bank and ensure that all segments of the bank continue to grow
equally well.
From that perspective, gold disbursement has shown some kind of a flattish or negative
growth on the disbursement side, which is leading to this trend. Part of this is regulatory or
technical in nature, as we are no longer renewing some of the accounts by closing and
rebooking them, which used to be shown as disbursement. Some of it is also a conscious
call, not to focus solely on gold loan as a business because we want to grow all businesses
together. That is broadly what is happening. Coming to the overall balance sheet growth
and the CASA point you mentioned, I have said before that this is the last year in which
CASA will grow slower than the term deposits. From FY2028 onwards, CASA will grow
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faster than TD, and then our CASA ratio will grow. There is no magic to it. It is simple
math. CASA has to grow faster than the TD, only then CASA ratio will start going up, and
that will start happening from FY2028. It is a well-calibrated, thought-out strategy that we
are working on. This will also help us in reducing the cost of funds because CA is what we
are focusing on and our wholesale is also doing some business there. All of this together
will help us in building a more profitable balance sheet. From that perspective, we are on
track in our scale phase and will continue to grow.
Navneet Bhaiya:
Sir, just one overall commentary. In your build phase as well, you grew your balance sheet
quite robustly, I would say, at a sequential growth of 5% to 6% for almost 12 quarters in a
row on an average. Now that you are in your scale phase, I am not asking for one quarter,
two quarter guidance, but where is your aspiration? Is it more than what your build phase
is? How should one think about it?
Pralay Mondal:
If you ask me about our aspiration, I can say, but what we guide is growth of 30% to 50%
faster than the system. We know that we did not do that this quarter, as the system grew
much faster because of factors like FCNR inflows. Generally, what we guide is 30% to 50%
faster than the system, which we will retain. Going ahead, aspiration, of course, is more
than that. It all purely depends on how well we are able to build the liability franchise
because growth on the asset side is not a problem. With all the cylinders firing, now
wholesale, SME will start firing, and retail will fire on the back of customer acquisition;
Asset growth is not a problem for us. But we need to have a calibrated growth based on
how quickly we can build up the liability franchise, and that is what will take us there. Now
technology is there, teams are there, products are coming, so we should be able to grow it.
But a liability franchise takes few years to grow. It just does not happen overnight. Even if I
add double the customers, it will not lead to equivalent balance sheet growth on the liability
side. It takes two to three years to build that kind of growth. That is where, and hence, we
have to continue to focus on little bit big tickets. We are around 48%, 52% on the retail,
wholesale kind of deposits. Our FCY, CDs, all of that dependence will remain for some
more time. Having said that, it will start coming down from next year with CASA growing
and other things growing. This year we will grow like this only. We should be able to grow
faster than what we have guided for going ahead from next year, FY2028 onwards, but it all
depends on how well we are able to build a liability franchise.
Navneet Bhaiya:
Great, sir. Thank you so much. I will join back the queue.
Pralay Mondal:
Thank you.
Moderator:
Thank you so much, Navneet. We will move to our next participant. We have Prabal
Gandhi of Incred AMC. Prabal, please go ahead. Prabal, you can unmute your microphone
and go ahead with your question, please.
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CSB Limited
October 23, 2026
Prabal Gandhi:
Hello, am I audible?
Moderator:
Yes, we are able to hear you now.
Prabal Gandhi:
Thank you for the opportunity. Sir, first question is, since Board had their meeting today,
how are you thinking or how is the board thinking in the context of Fairfax and IDBI deal?
With respect to that, I believe Fairfax also had a chunky deposit in the CSB Bank, about Rs.
4,000-Rs.5,000 Crores. How are you thinking on both these aspects?
Pralay Mondal:
Good evening, Prabal. First of all, the second one is easy to answer because Fairfax has no
deposit with the bank. I am not sure whether it is regulatorily allowed or not. I know that
there is no deposit of Fairfax or FIHM in the bank at this point of time.
Prabal Gandhi:
The related party number of Rs.5,000 Crores in the annual report, that does not pertain to
the Fairfax?
Pralay Mondal:
There is no deposit.
Satish Gundewar:
There is no deposit, Prabal. It may be other transactions.
Pralay Mondal:
There could be other transactions or some limits. The second question on Fairfax, Board
have not even discussed this point in the last two board meetings. Because it is amply clear
from the various media and other press releases which have been made by Fairfax and Prem
that they have got two years to decide on the two options given to them. At this point of
time, the transaction is yet to be completed, so it is too early to even discuss this. I am
talking about the IDBI transaction, because there are formalities out there such as the share
purchase agreements, regulatory approvals etc which have to be completed. Hence, I do not
even think whether they have time to discuss this at this point of time. Our Board has not
discussed anything and currently we are not even thinking on those lines. As and when they
come back and discuss with us, we will figure this out. But no, Fairfax does not have any
deposits with us.
Prabal Gandhi:
The second question is on the gold loan. We saw a 6% Y-o-Y decline in the tonnage. How
should we think about our market share in the gold loan business?
Pralay Mondal:
Typically, what happens is our segment is slightly higher end segment for gold loan
compared to some of the NBFCs and some of the more focused gold loan kind of banks,
which is also evident from the yields and the ticket size which we have and the quality of
customers. In these segments, almost 28% of our gold loan is above Rs.20 lakhs kind of a
value. These are not really the people who are taking gold loans to run their kitchen. They
are taking it to run a business. It is like cash flow for their business and is defined by how
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CSB Limited
October 23, 2026
much cash flow they need, because they have enough metal in their hand. What typically
happens is when prices go up, tonnage comes down, and when prices go down, gold
tonnage goes up and things like that. That typically happens. When you see that our tonnage
Y-o-Y has gone down, it is primarily happening because it has been going down in the Q3
and Q4 of last year as well, because that is where gold prices had gone up significantly.
As we are talking, we do not see too much of an outflow of tonnage on a daily basis or a
quarterly basis that we had seen, and because it is an annual number, it is showing annual
tonnage degrowth of almost close to double digit. It depends on the customer’s
requirements, and it is only a collateral. It is not that just because he has more collateral, he
will take more loans. It is not that segment we are operating in. That is one reason. Second
reason is, as I said before, that we want to focus on balanced mix. Now that we have the
right kind of system, right kind of products, right kind of franchise together across verticals,
we would rather start to focus on TBG and SME, and as and when we want to focus on the
retail assets, we will do that. It will be a more distributed bank, and hence, we do not want
to just focus only on gold loans as a business. Whatever is coming, we are good with that.
But as I said before, first we will achieve somewhere around 50% mix from our 53% last
year, then we will further take it down because I had given a glide path of going to 32%
gold by 2030. To keep that trend going, naturally we will continue to see this happening.
Prabal Gandhi:
Understood and just on the LTV side, when I compare CSB Bank’s gold loan LTV with,
say, peers like Karur or Federal Bank, their LTV is somewhere between 60%, 65%, but for
us, that number is about 75%. So how should we read into this?
Pralay Mondal:
We have a slightly larger agri portfolio, and in agri portfolio, LTV allowed is higher, and
that is what is leading to this. Also, agri portfolio gives us PSLC and other benefits as well,
which helps us overall. That is a conscious strategy which we have played out. We managed
it even in the most difficult scenario when LTV was brought down by the regulator from
90% to 75%. We know how to handle this. Even if we do a price sensitivity analysis, even
if there is a further drop in price, I do not see any reason to worry given the kind of quality
of customers which we have and also the segment we operate in. A large part of our
portfolio consists of agri loans and from a regulatory perspective on LTV, we are
comfortable there.
Prabal Gandhi:
Understood. Thank you, sir. All the best.
Pralay Mondal:
Thank you. Thank you, Prabal.
Moderator:
Thank you, Prabal. We will take our next question now. We have Sameer Baisiwala of
Sakman Capital. Sameer, please go ahead.
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CSB Limited
October 23, 2026
Sameer Baisiwala:
Thank you and good evening, everyone. Pralay, what is the outlook for ROA for this year
and next year, and what are the drivers for that?
Pralay Mondal:
Thanks, Sameer. Generally, if you look at the trend for us over the last one or two years,
you will see that we start with a lower ROA in the first quarter and peak in Q4. This year is
also looking the same, and quarter-on-quarter the ROA has moved to 1.29%. While we
wish to go towards 1.5%, we will be somewhere between this and 1.5%, this year.
Eventually, next year, our cost of funds will start coming down. As I said before last year
we had a very big income on the non-core side, which is treasury and PSLC. The
differential between that income and current income is so high that if you get some of this
income back next year, I am not expecting it this year, we will reach around 1.50% levels.
This year everything has gone wrong when it comes to ROA for a bank like us, given our
dependence on the fee income was a little bit more. Despite this fact, we are showing ROA,
which is close to 1.30%, which was our benchmark for this quarter. Next year, we can
safely say that we will cross 1.5%, and our objective is to be between 1.5% to 1.8% next
year. Probably closer towards 1.5%. Eventually, we want to aim somewhere close to 1.8%.
But it all depends on how the bond yields and other things also shape up next year.
Sameer Baisiwala:
Okay. Thank you so much.
Moderator:
Thank you. We have a follow-up question coming in from Mr. Shivaji Thapliyal. Sir, would
you like to go ahead, please?
Shivaji Thapliyal:
Yes. Just wanted some color on net interest margin. What are we looking at for the full year
and beyond that, in FY2028, and beyond? What kind of margin are we looking to settle at?
Thanks.
Pralay Mondal:
Good question, Shivaji, but we will have a consistent response on this. I had always said
that our net interest margin, we are aiming somewhere around 3.75% to 3.8% levels. We
are a little higher than that and we will be pretty much where we are at this point of time.
Having said that, if you look at slightly longer term, because you asked also about next
year. What will happen is, the core fee income will grow even more. We expect a lot of
income to come from, if not treasury, which is not necessarily core income, but from
wholesale banking, from SME, from transaction banking, especially because we are
investing heavily into transaction banking. As retail starts picking up, there also we will get
some fee income. A lot of these things happening, the overall income trajectory, in spite of
the impact on the insurance income on the corporate agency side or bancassurance side, will
improve. We should be able to safely assume 17% to 18% on the fee to total income. Given
that, we will be happy to retain a NIM of somewhere around 3.75% next year. As our mix
changes in the bank, the only way we can retain the NIM is by bringing down the cost of
funds and that is something which we are going to focus on. Now we are going to focus a
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CSB Limited
October 23, 2026
lot more on current accounts across all the franchise. Whatever change happens on the yield
side because of the mix change in the bank, which is a welcome move and everybody has
asked for it, including Board, and we are working on that, we will compensate by cost of
fund management. Our cost of funds is slightly high at 6.55%. I would say that we would
aim to bring down the cost of funds to somewhere around 6% next financial year, which
will give us a 50-basis points lift. Some of that will be absorbed because of the business mix
change. From a ROA perspective, I am more positive because the core fee income will do
better, and that will effectively give us a better ROA than where we are having today.
Shivaji Thapliyal:
Thank you.
Moderator:
Thank you so much, sir. As there are no more questions in the queue, we will take this as
the last question. I will now hand it over back to the management for further proceedings
and closing remarks. Over to you, sir.
Pralay Mondal:
Thank you very much for joining our Q2 FY2027 earnings call. It is a privilege to address
your questions. Let me assure you that in spite of some of the challenges and some of the
other global uncertainties, the bank remains focused on delivering the SBS 2030 objective.
In the scale phase, now we have everything with us, especially technology leadership and
distribution. Rest is a question of execution, and we believe that we have a good execution
team with us. With that, we believe that best is yet to come. Thank you very much and have
a wonderful evening.
Moderator:
Thank you. On behalf of CSB Bank Limited, that concludes today’s conference call. Thank
you all for joining us and you can now click on the leave icon to exit the meeting. Thank
you, everyone.
Note: This transcript has been edited for clarity and readability purposes and does not essentially purport to be a verbatim reproduction of
the conference call.
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