Summary
CSB Bank Limited - Q3 FY 2026 Earnings Call Summary Wednesday, January 28, 2026, 05.30 PM IST
Event Participants
Executives 3 B.K. Divakara (Executive Director), Pralay Mondal (MD & CEO), Satish Gundewar (CFO)
Analysts 6 Akshat Agrawal (SMIFS), Anusha Raheja (Dalal & Broacha), Ishmohit (SOIC Research), Natraj Shankar (DSP Mutual Fund), Parag Jariwala (White Oak Capital), Parth M. Gutka (360 One Capital), Vansh Solanki (RSPN Ventures), Shivaji Thapliyal (YES Securities)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Deposits | ₹29,812 crores | +21% YoY; Growth driven by bulk deposits (47% of term deposits) despite systemic liquidity stress. |
| Total Advances | ₹27,458 crores | +29% YoY; Outperformed industry growth, led by Gold and Wholesale verticals (+40% YoY). |
| GNPA | 1.96% | +16 bps QoQ; Elevated due to SME slippages in tariff-impacted sectors; remains within <2% guidance. |
| NNPA | 0.67% | Marginal increase; Management expects normalization via upgrades in Q4 FY26 and Q1 FY27. |
| PCR | 66.32% | -468 bps QoQ; Declined due to fresh slippages; targeting 70%+ as upgrades materialize. |
| Net Interest Income (NII) | ₹453 crores | +21% YoY; Supported by better asset yields and disciplined funding cost management. |
| NIM | 3.86% | +5 bps QoQ; Highest in current FY; guided range maintained at 3.7%–3.9%. |
| Cost-to-Income (CIR) | 60% | Improved YoY/QoQ; Aided by tactical PSLC timing and lower opex, though expected to remain near 60% through FY27. |
| ROA | 1.22% | Flat YoY; Impacted by higher credit costs; long-term target remains 1.5%. |
| CRAR | 19.41% | Strong capital position; Tier-1 ratio at 17.66% with lower risk-weighted assets vs. industry. |
Geographic & Segment Commentary
- SME (BLG): Growth slowed to 20% YoY (vs 30% previously) as management exercised caution. Stress observed in specific clusters (textiles/footwear) due to global trade uncertainties and tariffs, though 80%+ of the book remains collateralized.
- Gold Loans: Currently 50-51% of the total book with LTV below 60%. Management is shifting focus toward high-ticket working capital gold loans for business owners to ensure sustainable growth regardless of price volatility.
- Wholesale Banking: Significant growth contributor (+40% YoY) with high-pedigree credit committees overseeing exposures >₹50 crores. Focus is shifting from NBFC/Financial Markets toward Mid-Market and Commercial banking.
- Retail: Dragged by the intentional de-growth of the “repledger” business (down to ₹700 crores from ₹2,000 crores) following regulatory guidance. New growth in CV/CE and LAP is being prioritized alongside the new tech-stack rollout.
Company-Specific & Strategic Commentary
- Core Banking Migration: Completed migration to a new system and 52 surround systems, providing the foundation for the “Scale Phase” starting FY27.
- Liability Strategy: Implementing self-funding mandates for all business verticals (Wholesale/SME) to improve granularity. A new TASC (Trust, Associations, Societies, and Clubs) vertical has been created to drive CASA.
- Operational Efficiency: Targeting a reduction in CIR to 50% by FY30. Current elevated costs are attributed to the “transformation phase” investments in technology and brand.
- ECL Readiness: Maintaining ₹193 crores in contingency buffers above regulatory requirements to ensure a smooth transition to the upcoming ECL framework.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Advance Growth | 25% + (FY27) | Sustained by Wholesale and Gold; SME to resume growth orientation by Q1/Q2 FY27. |
| Deposit Growth | 20% + (FY27) | Required to fund asset growth; focus shifting to retail granularity post-tech migration. |
| NIM | 3.7% – 3.9% | Expected to stabilize in this range; upside capped by deposit competition and liquidity. |
| ROE | 15% (the “Lakshman Rekha”) | Management aims to touch this by end of FY26 and consistently exceed it in FY27. |
| Asset Quality | <2% GNPA | Q3 FY26 viewed as the peak for slippages; significant upgrades expected in Q4. |
Risks & Constraints
| Risk | Context |
|---|---|
| SME Sector Stress | Global trade volatility and tariffs impacting export-oriented SMEs. Management mitigating via slowed disbursements and high collateralization (80%+). |
| Concentration Risk | Gold loans constitute ~50% of the book. Strategy is to dilute this to 25-30% by 2030 by scaling Wholesale and non-gold Retail. |
| Deposit Lag | System-wide CD ratios >80% are keeping deposit rates high. CSB’s 92% CD ratio necessitates aggressive bulk deposit usage in the near term. |
Q&A Highlights
SME Slippages & Recoveries
- Question: What led to the ₹197 Cr slippage and what is the outlook for recovery? (Parag Jariwala)
- Answer: Primarily 10-11 material SME accounts impacted by sector-specific global headwinds. ₹30 Cr has already been upgraded in January; 40-50% of these slippages are expected to be recovered/upgraded shortly (Pralay Mondal).
NIM Sustainability
- Question: Can NIM improve further from 3.86%? (Akshat Agrawal)
- Answer: NIM has recovered from the 3.54% low in Q1, but given current liquidity and deposit rate pressures, it will likely stay between 3.7% and 3.9% (Pralay Mondal).
Gold Loan Strategy
- Question: Will gold loan growth persist if prices drop? (Yash Dantewadia)
- Answer: Growth is no longer just price-driven but demand-driven for working capital. LTV is conservative (<60%), protecting against a price correction of up to 20% (Pralay Mondal).
Cost Structure
- Question: Why did “other opex” decline this quarter? (Akshat Agrawal)
- Answer: Primarily due to tactical timing of PSLC purchases (none in Q3). CIR will remain near 60% for FY27 as the bank invests in customer acquisition post-tech migration (Pralay Mondal).
Key Takeaway
CSB Bank delivered a resilient Q3 FY26 with a 32% YoY growth in operating profit and a 21% rise in NII, though net profit remained flat at ₹153 crores due to elevated SME slippages. While the GNPA rose to 1.96%, management identifies this as a cyclical peak caused by technical factors and global trade impacts on domestic SME clusters. Strategically, the bank has completed its core technology migration, positioning itself for a “scale phase” starting FY27, with a focus on diversifying the loan book away from gold (targeting 25-30% mix by 2030) and scaling wholesale and retail assets. Advanced growth remains robust at 29% YoY, nearly double the industry average. Looking ahead, the bank maintains its “Lakshman Rekha” of 15% ROE and 1.5% ROA, supported by a stabilized NIM of 3.86% and expected recoveries in the SME portfolio during Q4.
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