The bank expects over Rs 70 crore of assets to go for restructuring under the newly announced framework, chief executive and managing director CVR Rajendran said.
CSB Bank stock gained 1.73 per cent to close at Rs 234.65 on the BSE on Monday.
Private sector lender CSB Bank on Monday reported over two-fold jump in September quarter net profit at Rs 68.9 crore, driven largely by core income growth. It had posted a profit of Rs 24.6 crore in the second quarter of 2019-20. The core net interest income grew 56 per cent to Rs 229.2 crore mainly on the back of a sharp widening of net interest margin to 4.50 per cent from 3.69 per cent in the year-ago period and an 11 per cent growth in loans.
Bank’s chief executive and managing director CVR Rajendran attributed the widening of margin to a sharp decline in cost of funds and its ability to increase the yield on advances despite the dip in interest rates. A bulk of the loan growth came from the wide-margin gold loans, which were up 47 per cent as compared to the year-ago period.
Rajendran told PTI that direct gold loans constitute 35 per cent of the book and the 100-year-old bank is targeting to hike the same to the cap of 40 per cent set by the board, by March because it sees opportunities. To control risks, the bank is lending at a loan to value ratio of 71 per cent at present and will not go beyond 78 per cent, he said, stressing that lending against gold has been its primary product since inception and it understands the business.
From an asset quality perspective, Rajendran said the proportion of gross non-performing assets declined to 3.04 per cent as at September-end 2020 as against 3.51 per cent by the year-ago period. Recent orders by the Supreme Court ensured Rs 9 crore of assets did not slip into NPA because of the moratorium, he said, adding that its estimate of overall stressed asset pool is Rs 150 crore.
Of the Rs 150 crore, over Rs 70 crore of advances are already part of the special mention accounts grouping, which means instalments have not been paid for between 31 to 89 days. Its overall provisions shot up over two-fold to Rs 80.7 crore during the quarter under review, and included Rs 15.6 crore for COVID-19 related provisions and an additional provision of Rs 33 crore on investments as yields have gone down, he said.
The bank expects over Rs 70 crore of assets to go for restructuring under the newly announced framework, he said. A team led by Pralay Mondal has joined the bank to look at the retail and the small business lending, and the bank will start writing loans from January onwards through it, he said. The bank’s overall capital adequacy stood at over 18 per cent and it will not be looking for any fresh raising of funds for the next two years, Rajendran said, hinting that there may be a secondary market transaction in which its promoter Fairbridge Capital may reduce stake.
He added that the focus on gold loans helps it conserve capital. CSB Bank stock gained 1.73 per cent to close at Rs 234.65 on the BSE on Monday.