CSB Bank — Q4 FY26 earnings call

Call held 4 May 2026

Management summary

CSB Bank concluded FY26 with strong growth in profits and assets, driven by robust deposit and credit expansion that outpaced industry averages. The bank successfully completed a major technology transformation, setting the stage for future retail franchise growth. While asset quality improved significantly, NIMs faced pressure from rising costs and a tactical reliance on wholesale deposits. Management expressed confidence in achieving its SBS 2030 vision, with a focus on liability franchise building and targeted SME growth.

Highlights

  • Net profit for Q4 FY26 grew 32% sequentially to Rs.202 Crores, with full-year net profit at Rs.633 Crores (7% growth over FY25).

  • Operating profit grew 19% on a FY basis to Rs.1085 Crores.

  • Deposits grew 20% YoY, outpacing industry growth of 13.5%, and asset growth was 27% YoY, higher than industry's 16%.

  • GNPA and NNPA ratios reached lowest levels in four quarters at 1.66% and 0.4% respectively, with PCR at 76.38%.

  • RoA for Q4 FY26 stood at 1.53% and RoE at 17.66%, both highest in the fiscal year.

  • Successful migration to a new core banking system and other technology advancements completed.

Concerns

  • Banking sector NIM is expected to remain under pressure due to rising costs and unabating volatility.

  • Wholesale bulk deposits constitute approximately 50% of overall term deposits, impacting cost of funds.

  • Meaningful retail asset growth is not expected until FY2028 onwards, primarily due to past regulatory changes in loan against gold security and core system migration delays.

Key financials

2 periods

Headline

  • Operating Profit (FY)
    ₹1,085 Cr
    YoY +19%
  • NII (FY)
    ₹1,720 Cr
    YoY +17%
  • Cost-to-Income Ratio (FY)
    62.5%

Q4

  • Net Profit
    ₹202 Cr
    QoQ +32%
  • NIM
    3.8%
  • RoA
    1.5%
  • RoE
    17.7%
  • GNPA
    1.7%
  • NNPA
    0.4%

What they filed

Q1 FY27: revenue up 23.6%, net profit up 26.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue865 919 981 1,041 1,109 +28%1,154 +26%1,201 +22%1,287 +24%
Net profit138 152 190 119 160 +16%153 +1%202 +6%150 +26%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Liquidity Liquidity disclosed LCR average for Q4 was around 109%, NSFR was around 122%. CRAR continues to be well above regulatory requirement at 20.66%, with Tier-1 ratio at 18.93%.
    On the liquidity side, bank has managed liquidity risk efficiently. CD ratio stood at 91%. Average LCR for the quarter is at 109%. NSFR ratio was around 122%. On the Capital-base - CRAR continues to be well above regulatory requirement and stood at 20.66%. Tier-1 ratio as on March 31, 2026 stood at 18.93%.

Guidance & targets

Profitability

  • Cost-to-Income Ratio Profitability · FY2027 · High confidence 60-65%
    On the CTI, I would always say that we will be between 60% to 65% till end of FY2027.

    — MR. PRALAY MONDAL

  • Cost-to-Income Ratio Profitability · FY2028 onwards · High confidence Significantly lower
    FY2028 onwards, the operative leverage will kick in because all said and done, technology upgrade has just come in now. From 2027-2028 onwards, we will start seeing the operating leverage across branches, across products, and across the technology investments which we have done. Till FY27 end, our CTI will remain between 60% to 65% and we are somewhere in the midway, around 62% there. That is the answer to your four questions.

    — MR. PRALAY MONDAL

  • RoA Profitability · Next year · High confidence ~1.5%
    Coming to next year prediction, I think a range of somewhere around 1.5% and 15% for ROA and ROE respectively will sustain.

    — MR. PRALAY MONDAL

  • RoE Profitability · Next year · High confidence ~15%

    — MR. PRALAY MONDAL

  • NIM Profitability · Ongoing · High confidence 3.75-4%
    On the margins, the general guidance which I have always given is that, it will be between 3.75% to 4%. We are right in the middle of it, somewhere at 3.83% in Q4 FY 26. I think it is very difficult to predict in basis points that it will go up or go down, but it will remain in the range of 3.75% to 4%.

    — MR. PRALAY MONDAL

Asset Growth

  • Retail Asset Growth Asset Growth · FY2028 onwards · Medium confidence Meaningful growth
    Our meaningful growth in retail assets will start from FY2028 onwards.

    — MR. PRALAY MONDAL

  • SME Growth Rate Asset Growth · Next two years · Medium confidence 28-30%

    From 2-3% today

    Whatever happened, single-digit growth is given and hopefully we will be back to that 28%-30% growth range in the next two years.

    — MR. PRALAY MONDAL

  • Loan Growth Asset Growth · Next year · Medium confidence 25%
    I think loan growth will be a function of our ability to build the liability franchise, but yes, I think 25% is something that we will strive for. We will be disappointed if we do not do that part, that much at least.

    — MR. PRALAY MONDAL

Portfolio Mix

  • Gold Loan as % of Portfolio Portfolio Mix · by 2030 · High confidence 30%

    From 44-53% today

    Our eventual play is to bring gold loan to 30% of our portfolio by 2030.

    — MR. PRALAY MONDAL

  • NRI Deposits as % of Deposits/Liability Portfolio Mix · Long run · Medium confidence At least 20%

    From ~13% today

    In the long run, at least 20% of our deposits/liability must come from NRI and we have created a separate vertical structure for this.

    — MR. PRALAY MONDAL

  • SME Portfolio as % of Book Portfolio Mix · by 2030 · High confidence 18%

    From ~11% today

    Eventually, the 2030 commitment of around 18% of SME portfolio into the book remains and it is now around 11%.

    — MR. PRALAY MONDAL

What to watch in Q1 FY27

Retail Franchise Journey Kickstart

Q4 FY2027/Q1 FY2028
Current Negative retail asset growth in FY26
Target Meaningful growth in retail assets

Why it matters

Essential for diversifying the asset book and achieving the SBS 2030 vision, marking a key inflection point for the bank's growth strategy.

We plan to meaningfully kickstart our retail franchise journey by Q4 FY2027/Q1 FY2028 - when we will start seeing the portfolio growing on the asset side.

Risks & concerns

  • Global Economic Volatility and Inflation

    medium

    West Asian crisis, higher crude prices, and global growth remaining subdued are expected to reduce Indian growth by 50 basis points and keep banking sector NIM under pressure.

    Management acknowledged

  • NIM Pressure from Rising Costs

    medium

    Deposit growth continues to lag credit growth, leading to higher bulk deposit and CD rates in Q4, which puts pressure on banking sector NIM.

    Management acknowledged

  • Cybersecurity Threats and Regulatory Compliance

    medium

    RBI's April 27 advisory on AI-related cybersecurity requires banks to submit an update/plan to the board/ITSC by end June, indicating ongoing work and potential costs.

    Management acknowledged

  • Delayed Retail Asset Growth

    low

    Meaningful growth in retail assets is not expected until FY2028 onwards, primarily due to past regulatory changes in loan against gold security and delays in core system migration.

    Management acknowledged

Q&A highlights

7 direct
LCR and Wholesale Deposits Strategy Direct
On the LCR, average for quarter ended March was around 109% and as we are talking today the number is significantly better compared to that point of time. We all know that March being a year/quarter end, the kind of deposit rates which were there in the ecosystem. As our bulk deposits are around 50% and our CASA being slightly on the lower side, we had to play tactically on this one while maintaining the average LCR on a comfortable level.

Analyst questioned the declining LCR and high proportion of wholesale deposits, which management explained as a tactical, short-term strategy to manage costs and build the liability franchise.

Asked by MR. SHIVAJI THAPLIYAL

Gold Loan Portfolio Strategy and Tonnage Growth Direct
Our eventual play is to bring gold loan to 30% of our portfolio by 2030. Out of that, at least 5% of that 30% will be working capital loan and we are launching a product, which is targeted towards working capital SME backed by gold as a collateral.

Analyst raised concerns about declining gold loan accounts and tonnage growth. Management clarified a strategic shift towards larger ticket sizes and productive usage, targeting a specific portfolio mix by 2030, acknowledging current growth is 'artificial'.

Asked by MR. SHIVAJI THAPLIYAL

Retail Asset Growth Timeline and Strategy Direct
Our core system migration for many reasons have got little delayed in terms of decision making about the vendor and the roll out timelines. We started the core system migration, for various internal reasons only in FY2025 though the decision was taken in FY2024. The roll out happened in May 2025 along with the surround systems in a quick and record time.

Analyst questioned the slow pace of retail asset growth. Management attributed it to delays in core system migration and emphasized a strategy of building the liability franchise first, with meaningful retail asset growth expected from FY2028.

Asked by Vibhor Talreja

NIM Trajectory and Drivers of Yield Compression Direct
On the margins, the general guidance which I have always given is that, it will be between 3.75% to 4%. We are right in the middle of it, somewhere at 3.83% in Q4 FY 26. I think it is very difficult to predict in basis points that it will go up or go down, but it will remain in the range of 3.75% to 4%.

Analyst sought clarity on NIM trajectory and drivers of yield compression. Management reiterated a 3.75-4% NIM band, explaining compression was due to repo rate cuts, BLG portfolio, and MCLR repricing, with all factors having played out.

Asked by Akshat Agrawal

AI-related Cybersecurity Threat and Preparedness Direct
There is an advisory dated April 27, which prescribes certain actionable for the banks and within that there are guidance/ directional inputs on the things that the banks needs to put together. Banks have to place an update/plan to the board/ITSC within a period of two months i.e., by end June.

Analyst inquired about the bank's response to recent AI-related cybersecurity advisories. Management confirmed awareness and ongoing work to comply with the RBI's directive by end June.

Asked by Narendra Gandhi

Cost-to-Income Ratio Outlook Partial
I never said that cost to income will come down from next quarter. I said it will remain for FY2027 in the range of 60 to 65%, hopefully somewhere around where we are. FY2028 onwards it will start coming down and by FY2030, we should be significantly lower than this.

Analyst challenged management's previous statements on CTI reduction. Management clarified the timeline, indicating CTI will stabilize at 60-65% until FY2027 before seeing significant reduction from FY2028 onwards.

Asked by Narendra Gandhi

SME Growth Expectations Direct
Whatever happened, single-digit growth is given and hopefully we will be back to that 28%-30% growth range in the next two years.

Analyst asked about the low SME growth last year. Management explained it was a conscious decision due to external factors and committed to accelerating growth to 28-30% in the next two years, targeting 18% of the portfolio by 2030.

Asked by Akshat Agrawal

ECL Transition Impact and Provisioning Direct
The transition impact is not a significant number for us at the moment as we have some advantage because of the aggressive provisions that we make on the NPAs and even on standard assets, we have this additional contingency provision created at the time of Covid which is above Rs.105 Crores. These provisions will now get subsumed into the overall provision that we hold.

Analyst inquired about the financial impact of transitioning to ECL. Management stated the impact would be marginal due to existing aggressive provisioning and a significant contingency buffer.

Asked by Parth Gutka

3 min read 8 chapters

Detailed narrative

Strong Financial Performance in FY26

CSB Bank reported a robust Q4 FY26 and full-year FY26 performance. Net profit for Q4 FY26 grew 32% sequentially to Rs.202 Crores, while full-year net profit stood at Rs.633 Crores, a 7% growth over FY25. Operating profit for the full year increased by 19% to Rs.1085 Crores, and Net Interest Income (NII) grew 17% on a full-year basis to Rs.1720 Crores, with Q4 NII growing 25% YoY.

Robust Asset and Deposit Growth Outpacing Industry

The bank demonstrated strong growth in both deposits and advances, significantly outpacing industry averages. Deposits grew 20% year-on-year, compared to the industry's 13.5% growth. Asset growth was even more robust at 27% year-on-year, against an industry average of 16%. Despite this, the CASA ratio remained around 20%, and wholesale deposits constituted approximately 50% of overall term deposits.

Improved Asset Quality and Capital Adequacy

Asset quality metrics showed significant improvement, with GNPA and NNPA ratios reaching their lowest levels in the last four quarters at 1.66% and 0.4% respectively. The Provision Coverage Ratio (PCR) stood at 76.38% (without PWO), and the bank maintained a provisioning buffer of Rs.210 crores above regulatory requirements. Capital Adequacy Ratio (CRAR) was strong at 20.66%, with Tier-1 ratio at 18.93%.

NIM Pressure and Strategic Management

Net Interest Margin (NIM) for Q4 FY26 was 3.83%, with the full-year NIM at 3.76%. Management noted that NIM faced pressure due to sharply fallen yields and increased cost of deposits/funds, particularly from a tactical reliance on wholesale bulk deposits. The bank aims to maintain NIM in the 3.75-4% range, expecting that a changing business mix and cross-sell initiatives will compensate for any interim NIM fluctuations.

Technology Transformation and Future Growth Drivers

CSB Bank successfully migrated to a new core banking system (OGL, OFSAA) and 50+ surround systems, which is expected to enable meaningful scaling. The bank plans to implement transaction banking systems (Vayana, Aurion pro) in the next 3-4 months. This technological foundation is crucial for kickstarting the retail franchise journey by Q4 FY2027/Q1 FY2028 and accelerating SME growth to 28-30% in the next two years, targeting 18% of the portfolio by 2030.

Evolving Gold Loan and NRI Deposit Strategies

The gold loan portfolio saw a shift towards larger ticket sizes, with management targeting 30% of the portfolio by 2030, including 5% for working capital loans. NRI deposits, currently around 13% of total deposits, are targeted to reach at least 20% in the long run, supported by a dedicated vertical and plans for a Dubai representative office, despite short-term disruptions from the West Asia crisis.

Cost-to-Income Trajectory and Profitability Outlook

The Cost-to-Income ratio for FY26 was 62.53%. Management guided that the CTI would remain in the 60-65% range until FY2027, with operative leverage expected to kick in from FY2028, leading to a significantly lower ratio by FY2030. The bank targets an RoA of approximately 1.5% and an RoE of 15% for the next year, emphasizing that these metrics will sustain.

Global Headwinds and Regulatory Compliance

Management acknowledged global economic headwinds, including the West Asian crisis and inflation risks, which could impact Indian growth by 50 basis points. The bank is also actively addressing the RBI's April 27 advisory on AI-related cybersecurity threats, with plans to submit an update/plan to its board/ITSC by end June, highlighting the critical and evolving nature of this compliance.

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