CSB Bank advances likely to grow by 20-25% next fiscal

CSB Bank estimates its advances to grow by 20-25% in the next fiscal, with demand seen to be good from the SME and retail sectors. In the current fiscal, the Thrissur-based lender said it will grow only in single digits because of premature closures and takeover of loans by competitors.

CVR Rajendran, managing director & chief executive officer of CSB Bank, told FE growth was elusive in FY22 because of the prevailing circumstances and cautious approach.

“Not much growth has happened in the current year as SME and wholesale banking were stagnant. Retail loans have not shown growth. Because of excess liquidity in the market, there is cheaper competition. In wholesale banking, there were a lot of premature closures and in SME, takeovers by bigger banks at lower rates,” he said.

Rajendran said lending picked up and gold loans started growing from August. The gold loan portfolio is 36-38% of the total advances and will continue to grow and remain a focus.

“Retail is now doing well and SME, particularly from the manufacturing sector, is also showing growth. Advances are likely to grow by 20-25%. Only the two-wheeler loan portfolio looks muted,” he said.

CSB reported a 180% year-on-year increase in its third-quarter net profit to 148.25 crore over 53.05 crore in Q3 of FY21. Net profit was Rs 118.57 crore in the preceding quarter of the current fiscal.

Asset quality of the lender improved from the preceding quarter, with gross non-performing assets (NPA) as a percentage of gross advances reported at 2.62% for Q3 of FY22, from 4.11% in the preceding quarter and 1.77% in the year-ago period. Net NPA as a percentage of gross advances stood at 1.36%, against 2.63% in the preceding quarter and 0.68% in the third quarter of FY21.

Provisions were written back for the quarter in review, with recoveries and upgrades seen higher than slippages.

“Slippages are way below our recoveries, even in gold loan NPAs. Because of our accelerated provisioning, we were able to have lot of recoveries in written-off accounts and provided accounts. This was deducted from the provisions as per the new policy. Our credit cost will be negative for the current year and will continue to be negative for the next two years,” Rajendran said.

Giving gold loan customers breathing space to repay loans during the pandemic was beneficial to both, customers and the bank, he said. “Once the Covid-19 situation improved, the customers’ earnings also improved, enabling them to repay the loan and get back the jewellery which had a sentimental value attached to it,” he said.

Speaking about his tenure, Rajendran, who is retiring from service on March 31, said the bank had been classified as a distressed bank when he took over, and in less than five years, CSB won the best bank award in the small bank category.

“In the last five years, we have completely cleaned the balance sheet. Our NPA ratios are among the best in the industry. Our provision coverage ratio is more than 90% and the capital adequacy ratio is also high. Our return on equity and return on assets are also higher than the industry average. We don’t need capital for the next two years and if the entire profit is ploughed back we may not require capital for many more years to come. The bank can stand on its own without raising further capital,” he said.

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