CSB Bank surges 16% in a weak market, hits fresh 52-week high

Shares of CSB Bank, on Friday, rallied 16 per cent to a fresh 52-week high of Rs 273.95 on the BSE in an otherwise weak market on the back of heavy volumes. The stock surpassed its previous 52-week high of Rs 270, touched on November 10, 2020. It hit an all-time high level of Rs 314 on December 5, 2019.

At 02:50 pm, CSB Bank was trading 12 per cent higher at Rs 265, against 1.07 per cent decline in the S&P BSE Sensex. The trading volumes on the counter jumped more than 10-fold with a combined 3.5 million equity shares changing hands on the NSE and BSE.

Fairfax-backed CSB Bank had reported a strong 89 per cent year on year (YoY) jump in net profit at Rs 53.05 crore during the quarter ended December 31, 2020 (Q3FY21) as compared to Rs 28.14 crore during the same period last year.

For a better part of the current financial year 2020-21 (FY21), the CSB Bank had been extremely selective on its lending portfolio and focused largely on expanding its Gold Loan business (which is 100 per cent collateralised), leveraging the relaxation in the RBI’s LTV regulation. This not only helped revive profitability, but the loan book grew 21.6 per cent YoY to Rs. 13,137 crore (9MFY21).

To sustain the recently discovered growth trend, the management has chalked out a retail driven growth strategy and a number of key appointments have been made. Mr. Pralay Mondal (ex- Axis Bank) has taken over as the president of the Retail & SME portfolio.

Brokerage firm Ventura Securities expects this new team to grow the retail (excluding Gold Loan) and SME books by CAGR of 44.6 per cent and 17.7 per cent to Rs 7,283 crore and Rs 3,914 crore, respectively, for the period FY20-FY23.

With the contribution of the high yielding retail and SME books set to increase, the brokerage firm expects NIMs to expand by 106 bps to 4.4 per cent by FY23. However, on account of the aggressive growth plans of adding around 500 new branches over the next 4 years and hiring in the new verticals, we expect the cost to income ratio to remain elevated at 51.8 per cent for FY23 (50.4 per cent in Q3FY21), the brokerage firm said in stock update.