CSB Bank Limited Q2 FY2027 Earnings Conference Call

Key Financial Figures

  • Net Profit: ₹183 crore for Q2 FY2027, representing 22% sequential growth and 14% year-over-year growth compared to Q2 FY2026
  • Operating Profit: ₹276 crore for Q2 FY2027, growing 10% sequentially
  • Net Interest Income: ₹510 crore for Q2 FY2027, growing 7% quarter-on-quarter and 20% year-over-year
  • Other Income: Grew 20% sequentially over Q1 FY2027; excluding treasury profit, grew 27%
  • Cost to Income Ratio: 64.8% for Q2 FY2027
  • Net Interest Margin (NIM): 3.81% for Q2 FY2027, compared to 3.66% for Q1 FY2027 and 3.81% for Q2 FY2026
  • Return on Assets (ROA): 1.29% for quarter ended September 30, 2026, compared to 1.09% for Q1 FY2027
  • Earnings Per Share (EPS): ₹42 for Q2 FY2027, compared to ₹35 for Q1 FY2027
  • Return on Equity (ROE): Improved from 12.71% in Q1 FY2027 to 14.74% in Q2 FY2027

Balance Sheet Metrics

  • Deposits: Recorded 18% year-over-year growth
  • CASA Ratio: 18.96%
  • Credit-Deposit Ratio: 90.39%
  • Liquidity Coverage Ratio (LCR): Average 127% for the quarter
  • Net Stable Funding Ratio (NSFR): 124%
  • Gross Advances: 22% year-over-year growth
  • Yield on Advances: 10.92% for Q2 FY2027, compared to 10.65% in Q1 FY2027

Asset Quality

  • Gross NPA Ratio: 1.58%
  • Net NPA Ratio: 0.33%
  • Provision Coverage Ratio (PCR): 87.65% with provisions written off (PWO), 79.19% without PWO
  • Provisioning Buffer: ₹177 crore held over and above regulatory requirements
  • Credit Cost: 24 basis points for the quarter

Capital Adequacy

  • CRAR: 19.55%, well above regulatory requirements
  • Tier 1 Ratio: 18.54%
  • Book Value Per Share: ₹290

Business Performance and Segment Growth

  • Gold Loans: 36% year-over-year growth
  • Corporate Segment: 44% year-over-year growth
  • SME Segment: Moderate growth with calibrated approach
  • Retail Portfolio: Growth driven by secured/income-generating assets; degrowth in loan against security (primarily gold repledger business)
  • Network: 872 branches and 844 ATMs as of September 2026

Strategic Updates

Management highlighted completion of the "Sustain-and-Build" phases of the SBS 2030 journey and transition to "scale phase" focusing on:

  • Geographical expansion across North, West, South, and partially East regions
  • Metro markets showing growth momentum post core system upgrade completion
  • Continued technology investments in transaction banking and digital frameworks
  • Retail strategy centered on customer acquisition for liability side building
  • Corporate banking deepening through relationship-led coverage and sector-focused solutions
  • MSME business acceleration expected from current quarter onwards

Forward-looking Guidance

  • Gold Loan Mix: Target to reduce from 53% (FY2026) to 50% by end of current year, with glide path to 32% by 2030
  • CASA Growth: Expected to grow faster than term deposits from FY2028 onwards
  • ROA Target: Aiming for 1.5-1.8% next year (FY2028), with current year expected between current level and 1.5%
  • NIM Outlook: Target to maintain around 3.75-3.8% levels
  • Cost of Funds: Aim to reduce from current 6.55% to around 6% next financial year
  • Fee Income Guidance: Core fee target of 14-15% of total income; overall fee target of 17-18%
  • Growth Aspiration: 30-50% faster than system growth

Management Commentary on Macro Environment

  • Global growth revised upwards to 3.1% for 2026 and 3.4% in 2027
  • Global inflation projected to move upwards to 4.7%
  • RBI revised India's GDP growth to 7.1% for FY2026-27
  • CPI inflation expectation of 5.2% for FY2026-27
  • Domestic challenges from rising crude prices impacting INR and domestic rates

Q&A Highlights

  • Other Opex Increase: 18% QoQ increase primarily due to technology investments, distribution expansion, and infrastructure spending
  • Fee Income Growth: Core fee grew 27% YoY; overall fee degrowth of 22% YoY due to market-linked non-core fee lines
  • Yield Improvement: Driven by asset quality improvement, yield management across segments, and gold loan yield optimization
  • Write-offs: Technical write-offs of fully provisioned vintage unsecured book with no credit cost impact
  • Technology Transformation: Completed 18 months ago with investments in digital infrastructure, ServiceNow platform, and customer experience enhancements
  • IRDAI Impact: Expected minimal impact (0.5-1% on fee income) from proposed guidelines
  • Gold Loan Tonnage: 6% YoY decline attributed to price movements and conscious business mix strategy

Capital and Ownership

Board has not discussed Fairfax and IDBI deal implications as transaction formalities are ongoing. Fairfax does not maintain deposits with the bank.