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CSB Bank reported stable numbers in 1QFY24. A strong loan growth (31% YoY, 2.2% QoQ) was reported driven by Gold loans (42% YoY) and comfortable CDR level of 86%. The credit quality recovery (NNPA: 0.32% v/s 1.7% at the end of FY22) was meaningful driven by lower delinquencies and quicker recoveries. A healthy capital position (CAR: 26%), likely to keep the momentum going. Factoring double digit advance growth, stable NIMs and lower credit cost; the bank may post 22% PAT growth in current fiscal year. An attractive valuation (1.1xFY25E Adj. BVPS) makes the stock rewarding factoring FY24E ROA of 1.5%. Hence, we reiterate BUY.

Healthy credit growth trajectory driven by Gold Loans: The bank’s advance growth remain strong in this quarter. Net advances’ registered a growth of 31%. Gold loan book (46% of loans as on 1QFY24) has witnessed a robust growth of 42% YoY and accounted 74% of the incremental sequential credit growth. The share of Gold loan portfolio has increased from 36% in 2QFY22 to 46% in recent quarters. Additionally, the CDR of 86% provides further room for credit off-take. Moreover, the deposit traction remained strong at 21% YoY. Nonetheless, MSME loan growth was tepid, the management maintains its stance of it being the biggest growth driver in the non – gold book during this calendar year. Retail products in the bank’s pipeline are expected to be launched in coming quarters. We expect the loan book to grow at a rate of around 20% in FY23E and FY24E. The gold loan share is expected to increase to half of the gross loans and then gradually come down as some of the other products start picking up. Management expects the bank’s advance to grow at 1.5x the industry growth rate. Furthermore, the management targets 100 branches to be added every year for next five years and simultaneously invest in technology for customer acquisition.

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