CSB Bank

CSB Bank reported a net profit of INR 119 crores for Q1 FY26, marking a 5% year-on-year increase. Operating profit saw a robust growth of 28% YoY, reaching INR 220 crores. The bank's Cost to Income Ratio improved to 64.70% from 67.69% in Q1 FY25. Net Interest Margin (NIM) stood at 3.54%, with management indicating it has bottomed out and is expected to stabilize. Return on Assets (ROA) for the quarter was 1.03%, with a historical trend of increasing through the year.

The bank demonstrated strong growth in both deposits and advances, significantly outperforming the industry. Deposit growth was 20% YoY, compared to an industry average of around 10%. CASA (Current Account Savings Account) grew by 13% YoY, with the CASA ratio at 23.49%. Net advances expanded by 31% YoY, against an industry growth of approximately 10%. All key asset verticals, including gold, corporate, and SME, registered over 30% YoY growth.

Asset quality metrics remained stable, with a Gross NPA ratio of 1.84% and a Net NPA ratio of 0.66% for Q1 FY26. The Provisioning Coverage Ratio (PCR) stood at 80.46% with PWO (Provisions Written Off) and 64.52% without PWO. The bank holds a provisioning buffer of INR 194 crores over regulatory requirements, including INR 105 crores in contingency provisions. Management expects portfolio quality to improve in Q2, with INR 25 crores of slippages already upgraded.

CSB Bank successfully completed a major technology transformation, migrating to the new CBS Flexcube system and rolling out over 50 surround systems. This overhaul is considered a foundational step for scaling the bank's operations and improving customer experience. The 'real scale phase' of the bank's SBS 2030 journey is expected to commence from FY27, with a goal to become a respectable mid-sized bank by 2030. The new systems will enable innovative products, seamless digital experiences, and operational efficiencies.

The cost of deposits saw an increase in Q1 FY26, which management attributed to two main factors. Firstly, bulk deposits were taken at the end of March to fund a 31% asset growth, with the cost impacting the entire Q1. Secondly, existing long-term deposits that matured were repriced at higher rates than their initial booking. However, management expects a drop in deposit costs from Q2/Q3 onwards, anticipating a 20 basis points reduction from current levels by Q4 FY26.

The bank's loan book mix saw gold loans increase by 1% this year, while MFI and Agri segments were deliberately slowed down. Wholesale advances, currently around 23% of the book, are projected to grow to 25% by year-end. SME advances are expected to increase by 50 basis points to 13-14%. Retail loans, particularly Loan Against Securities (LAS), may see reclassification due to new RBI circulars, potentially shifting some exposure to gold or other segments.