CSB Bank NIM to moderate at 4.5-5% in FY25: MD

The bank's NIM, a key indicator of lenders' profitability, has already moderated by 41 bps on a year-on-year basis to 5.11%, as low-yield loan segments grew faster than high-margin advances.

Written by Piyush Shukla

February 15, 2024 01:30 IST

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Overall advances of the lender stood at Rs 22,867 crore as on December 31.

Thrissur-headquartered CSB Bank expects its net interest margin (NIM) to normalise between 4.5% and 5% in the next financial year, from 5.11% in Q3FY24, managing director and CEO Pralay Mondal told FE.

The bank’s NIM, a key indicator of lenders’ profitability, has already moderated by 41 bps on a year-on-year basis to 5.11%, as low-yield loan segments grew faster than high-margin advances.

Mondal said while the bank will retain the NIM above 5% this fiscal, the margins will likely squeeze to below 5% level once the share of low-yield loans grows and that of high-yielding gold loans declines.

Overall advances of the lender stood at Rs 22,867 crore as on December 31. Of that, gold loans accounted for 48%, the share of corporate loans was 27%, and retail and small and medium enterprises (SME) loans formed the rest. Mondal said the share of gold loans will remain stagnant at the current level till FY26, following which the corporate loan portfolio will rise.

By the end of FY30, the bank aims to trim its gold loan exposure to 20% of the overall book, he said, adding that the medium-term growth plan of the bank is to expand its balance sheet to over Rs 1 trillion by 2030.

On the liabilities side, CSB Bank will continue sustaining the current pace of the deposit growth of 21% YoY during Q4. Its overall deposits stood at Rs 27,345 crore as on December-end. Mondal said despite deposit mobilisation challenges, the bank has been able to lower its credit-deposit ratio to 82.86% as on December 31, from 87% last year. The bank lowered the pace of credit growth to achieve this, he said.

“We have bridged the gap between the deposit growth and the credit growth in a big way, and with deposits having a higher base, 21% funding (YoY growth in deposits) is equal to 23% credit growth in absolute terms,” Mondal said.

The bank does not see its low-cost current account, savings account (CASA) ratio rising above 30% till systemic liquidity starts improving and interest rates fall. The CASA ratio stood at 27.58% during Q3FY24, lower than 29.28% a quarter ago and 31.44% a year ago.

The gross and net non-performing asset ratio will remain at the Q3 level of 1.22% and 0.31%, respectively, during the fourth quarter, Mondal said.

This article was first uploaded on February fifteen, twenty twenty-four, at thirty minutes past one in the night.