Market cap at Rs5130 cr is over 2.5 times that of SIB
THRISSUR: CSB Bank, after its IPO along with its offer for sale (OFS) and the name makeover from the earlier Catholic Syrian Bank, is now far bigger a bank than South Indian Bank (SIB), at least on market capitalisation.
While South Indian Bank (SIB) is valued at Rs1983.46 crore on the stock markets as of Thursday, CSB Bank’s market capitalisation now far exceeds that of its ‘more illustrious’ neighbour – by more than two-and-a-half times, at about Rs5130 crore.
Market analysts are baffled by the valuation the investors are showering on CSB Bank shares, with the shares being traded at multiple times of its book value (BV) even as its far-better-placed rivals, the SIB and Dhanlaxmi Bank, have failed to exact a fraction of their book value from their ‘less sympathetic’ investors.
Even the combined market cap of SIB (Rs1983 cr) and Dhanlaxmi – at about Rs380 crore (as of Thursday, November 5), is a far cry from that of CSB Bank.
“This is quite interesting and I want to see how far this trend is going to last. On the one hand, the shares of SIB with a track record of continuous profit-making are trading at one-third of its book value, and on the other, CSB Bank, which has been in the red for years together is finding buyers at multiple times its book value…. both in the same market,” said one of the brokers.
The fact that CSB Bank reported a profit of Rs44.27 crore for the first half ending September end, 2019 against a whopping loss of Rs197.42 crore for the full year 2018-19 shouldn’t go amiss.
But, according to analysts, the bank has smartly over- provided during the financial year ending March, 2019 in order to pave the way for a lower provisioning during this vital half-year, in the run-up to the public offer.
The notes to the 2018-19 financials stated that, “As a cumulative effect of accelerated provisioning, the loss before tax has been higher by about Rs119 crore, at Rs197.42 crore for the year ending March 31, 2019.”
The provisions and contingencies for the first half ending September 30, 2019 was a relatively low Rs59.30 crore against a provision of Rs210.77 crore for the year ending March 30, 2019.
CSB Bank has now sufficient capital, close to Rs2000 crore, that gives it enough headroom to grow in the future. Analysts are keen to know which area the bank is choosing to grow. Already, the bank has built a substantial gold loan portfolio, which is about one-third of its loan book.
Lending against gold is a safe bet and lucrative too. Instead of offering credit lines to gold loan companies, why not directly lend to customers and make an easy buck?