CSB Bank for a comprehensive overhaul of corporate accounts

KOCHI: The Thrissur-headquartered century-old CSB Bank has announced a comprehensive overhaul of its corporate accounts.

While interacting with analysts and investors on the first quarter (Q1) performance of the bank, and explaining the new strategies going forward, Satish Gundewar, the chief financial officer (CFO) of the bank, said that there will be a complete rejig of the entire corporate banking business for CSB Bank.

Exiting corporate accounts

Gundewar said the bank will examine closely all corporate exposures the CSB Bank currently services.  He went on to announce that the bank will be indiscriminate in the said exercise.

 “We are exiting not only from weak accounts, but even from standard accounts thinking from a coverage perspective, relationship management perspective, comfort point of view etc,” he added.

He hinted that the corporate loan book could close the current financial year without any perceptible growth compared with the previous year.

“The corporate book could even remain flat when the current financial year draws to a close,” he added

Sources close to the bank told businessbenchmark.news that CSB Bank witnessed declines on several key performance indicators during the quarter ended June 30, 2024, and this must have prompted the bank to think afresh about the next strategy.

CSB Bank share

The CSB Bank share that closed at Rs322.10 on NSE in today’s trading (August 19) has lost almost 4.5 per cent during the month and about 23 per cent year to date.

More than a couple of slippages in loans, what might have really made bank edgy could be the deterioration in some of the bank’s key financial metrics.

Key financial metrics decline

The capital adequacy ratio (CAR) of the bank has dropped year on year (YoY) from 25.99 per cent to 23.61 per cent; the return on assets (RoA) has fallen from 1.79 per cent to 1.27 per cent; net interest margin (NIM) fell from 5.4 per cent to 4.36 per cent.

Moreover, the current account savings accounts (CASA) ratio has declined from 30.84 per cent to 24.90 per cent; return on equity (RoE) contracted from 17.61 per cent to 12.69 per cent and so on.

Though there have been erosion in the quality of assets and certain cost metrics too, the CSB Bank is confident that the worst is behind it now.

Nevertheless, the bank CFO confidently stated, “We believe the cost to income, gross NPA, net NPA and credit cost ratios have peaked out as of now, and the net interest margin (NIM) will go back to the trajectory upwards of 4.5 per cent, and the RoA will go upwards of 1.5 per cent from the second quarter onwards.”

Rating agency not worried

India Ratings (Ind-Ra) doesn’t seem to be worried about the future prospects of CSB Bank, especially from the capital perspective.

The healthy capital levels are aided substantially by gold loans that typically have low risk weights, and for CSB Bank, gold loans account for almost 50 per cent of the bank’s loan book.

A-grade corporate book

It’s a fact that about 80 per cent of the advances in the corporate segment of the bank has a rating of ‘A’ or above.

Ind-Ra opines that CSB has one of the lowest cost-of-deposits among the mainstream commercial banks, benefiting from a sticky depositor base.