CSB Bank Q1 Result Review - Strong Quarter Despite Elevated Opex: Dolat Capital
Growth driven by gold; credit costs continue to surprise.
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Dolat Capital Report
CSB Bank Ltd. reported good set of numbers with net interest income/pre-provision operating profit growth of 17% YoY each. Sequentially stable net interest margin at 5.4%, robust core fee lines, and low credit costs aided profit after tax growth of 15% and return on asset of 1.8% for the quarter.
With continued investment towards people and technology, opex growth was up sharply (11.5% QoQ), partly owing to one-offs. Loan growth at 2% during the quarter was led by gold (up 4% QoQ) other retail (up 6% QoQ).
We tweak estimates, factoring higher other income and lower slippages, offset by rise in opex assumptions.
Outlook and view
CSB Bank stands out for its robust liability franchise, superior NIM and strong asset quality metrics. The next two years could see significant investment in people, distribution and technology, in preparation for scale phase from FY26.
A likely Fairfax stake in IDBI Bank Ltd. remains an overhang.
Maintain 'Buy' with an unrevised target price of Rs 370 (1.5 times FY25E adjusted book value). The stock trades at 1.2 times FY25E ABV.
Risks to our view: Weaker than anticipated growth trends, higher than anticipated pressure on NIM, inability to contain opex.
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