CSB Bank will see a rise in its cost-to-income ratio in the 2023-24 financial year due to increased investments in technology, manpower and branch expansion, said its managing director and chief executive officer Pralay Mondal.
“We are looking at investing significantly this year, hence, I would expect our cost to income to get further elevated. Having said that, our pre-provision operating profit will not get impacted because we will grow the book and ensure that the overall revenue is sustained,” he said.
“There are four or five investments that we are looking at this year. Technology will be our heaviest investment. We have already added 46-47% more manpower this year. Next year, we will add equal or more manpower in terms of absolute numbers.”
The Kerala-based bank will also add 100 more branches with 50% of these featuring in northern and western regions. It will also invest in various digital channels.
The bank’s cost-to-income ratio rose to 57.12% in 2022-23 from 56.17% in 2021-22. Total operating expenditure rose 21% y-o-y to Rs 272.9 crore.
The bank intends to keep its cost-to-income ratio at 55-60% for the next three years.
“Each of the investments that we are making will have a payback period of around five years. To that extent, cost-to-income will start tapering down after FY25 onwards. By 2030, I would expect our cost to income to come down to 43-44%,” he said.
The bank’s net advances rose 31% y-o-y to Rs 20,651 crore as on March 31 driven by a growth in its marquee gold loan portfolio.
Currently, gold loan comprises 45% of the overall portfolio and retail at 14%. The bank aims to bring down its gold loan mix to 20% and increase the retail loan mix to 30% by 2029-2030. The bank plans to launch commercial vehicle and equipment loans.
“We need to do heavy-lifting on the retail side and we need to acquire a lot more customers. We are investing significantly on technology for the next two years because without technology, we cannot scale up retail.”