Gold will remain very important for next 2-3 years: CSB Bank MD Mondal

If you look at it, gold has exactly grown in line with our bank growth, bank has grown by 23 per cent and gold has also grown by 23 per cent on a Y-o-Y basis, Pralay Mondal said

Pralay Mondal, managing director and chief executive officer of CSB Bank discusses the FY30 growth strategy of the bank. He talks about the Fairfax stake sale plans, plans in the gold business and third-quarter numbers in an exclusive call with Shine Jacob. Edited Excerpts:

Your gold loan business has grown from 47 per cent to 48 per cent of the net advance mix. Are you focusing further on the gold loan?

If you look at it, gold has exactly grown in line with our bank growth, the bank has grown by 23 per cent and gold has also grown by 23 per cent on a Y-o-Y basis. To that extent, gold has done okay. The other businesses like SME have grown by 28 per cent and retail by 44 per cent. Wholesale has not grown well, because we were a little careful on the side, primarily because of liquidity issues in the market. Other than that, most of the verticals have done well.

Sometime back, you mentioned that you want to bring down gold to 20 per cent. Will the growth move in line with that strategy?

Our strategy is to bring it down to 20 per cent by FY30. I had said that for the next two to three years, gold will remain an important part of our portfolio and the mix will not change much because we need to invest in technology. Once the technology is up and running, then we will start picking up the retail and other businesses much better. The end goal for FY30 gold will be around 20 per cent, retail will be around 30 per cent, wholesale around 30 per cent and SME around 20 per cent. But broadly the mix will not change in the next two to three years. Gold will remain very important for the next two to three years.

We divided the journey into three parts, like in FY25 it will be more of the same and nothing much will be changing in the bank, FY27 is when our core system will get implemented fully and after that we will start picking up the other products. Between FY25 to FY27, we will start building the products and scaling up. After that, the real scale-up will happen. The growth between FY27 and FY30 will be faster than now because we have all products. Those businesses will pick up faster.

During the third quarter, your net profit was down by 4 per cent to Rs 150 crore, compared to Rs 156 crore in FY23. What were the major reasons for this dip?

Overall, we had a very good quarter. On a nine-month basis, we have grown well, in terms of profit, as well. If we compare this quarter with last year's quarter, there is a dip, primarily because last year we had a large recovery during the same period. Hence, if we look at pre-provision operating profit (PPOP), we are 1 per cent positive, even compared to the third quarter of the last financial year. Basically, because of the recovery last year, we are on a high base for this quarter.

If you look at the overall nine-month basis, we have done well on profits. If you look at all the other issues also, on a nine-month basis, we have seen a 6 per cent year-on-year growth in net profit, net interest income has seen 11 per cent growth, return on assets is also looking good at 1.78 per cent, net interest margin we have improved our last quarter at 5.11 per cent, deposit has grown by 21 per cent and advances by 23 per cent. Our GNPA and NPA, everything has come down. Except for this 4 per cent negative, whichever matrix we look at, it is a good quarter for us.

Fairfax was expected to reduce its stakes. Even now, the promoter is holding 49.72 per cent. Are any talks happening regarding that?

I think it has been informed to the stock exchange also that it has to be brought down to some extent by this year. I think they are working towards that and will do what the regulator has told us to do.

You have seen a decline in the distribution of branches in Kerala from 41 per cent to 36 per cent. Is this the strategy going ahead to diversify into other areas?

We want to be a full-service bank and have a universal banking licence. We are a pan-India distribution bank and will have all products and services. It will come once the technology is in play by FY25 onwards. On the distribution side, we already have enough branches in Kerala. Most of our incremental branches are coming in Tamil Nadu and other parts. Incremental branches are coming outside Kerala as we have lots of branches in the state.

Around 50 per cent of our deposits and 24 per cent of advances are coming from Kerala. Around 35 per cent of our total business comes from Kerala, which needs 36 per cent of branch distribution. We will plan to expand around 10-15 per cent of our branches every year.