CSB Bank - Q1FY22 First Cut - ICICI Direct

(CMP - Rs. 323, MCap - Rs. 5607 crore)

Soft quarter as asset quality weakens. Gold loans witness some stress.

Q1FY22 Earnings Summary

- CSB Bank posted decent operating performance considering current environment with NII growth of 44.5% YoY at Rs. 267 crore, sequentially NII was down 2.9% due to sharp 28 bps fall in NIMs to 5.14%. Rs. 24 crore interest reversals due to gold loans NPA. Other income growth was also stunted on yearly basis and 32% decline sequentially primarily on account of lower fee income and recoveries as well. Cost to income dropped meaningfully to 47.7% versus 66.8% QoQ as expenses dropped 37% QoQ due to lower business activity. Operating profit as a result showed healthy growth of 39.3% YoY and 39.4% QoQ. Provisions remained elevated at Rs. 98.2 crore due to rise in stress. Net profit stood at Rs. 61 crore (up 13.9% YoY) and slightly below our estimates

- Asset quality for the bank deteriorated meaningfully as GNPA and NNPA increased by 220 bps and 204 bps sequentially to 4.88% and 3.21%. Lockdowns due to Covid second wave impacted ground staff movement and thus collections as well, while other segments loans saw less impact gold loans portfolio felt the heat. Moving to lower LTVs in gold loans also increased pressure in this segment. The management expects recovery from gold loans without much haircuts or losses

- As on June 2021, the bank has Covid-19 related provisions worth Rs. 105.9 crore. Restructured advances form 0.48% of loan

- Business growth was also muted advances were down 4.3% QoQ to Rs. 13817 crore. Decline of 8.2% in gold loans and 12.5% in SME loans was primary reason for stunted business activity. Corporate loans saw decent growth of 11% YoY and 6.8% QoQ

- Deposit accretion was decent at 14.2% YoY to Rs. 18652 crore but sequentially it was down 2.5%. CASA deposits reported better growth of 29% YoY and as a result CASA ratio increased from 29.2% to 33.1% YoY. NR deposits saw 10 % YoY growth at Rs. 4387 crore and now form 24% of total deposits

CSB Bank's overall performance was muted with gold portfolio being key concern. However we could see good recovery with unlocking. Management commentary would be key to look for.

We will be coming out with a detailed report soon.

Source : Equity Bulls

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