CSB Q3 results show asset quality woes; high reliance on gold continues

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Kerala-based private sector lender, CSB Bank’s third quarter (Q3) numbers give us two key takeaways - the continuing reliance on gold loans and, second, some worries on the asset quality front.

The bank has said its gross NPAs have fallen on a quarter-on-quarter basis. Gross NPA as percentage of advances fell to 1.77 percent as on December 31, 2020, compared with 3.04 percent in the September quarter, it said. Similarly, net NPA as percentage of advances decreased from 1.30 percent as on September-end to 0.68 percent as on December 31, the bank said.

However, the bank has not classified any accounts that were standard as on August 31 as NPAs following the Supreme Court’s interim order. If one exclude this factor, the bank’s proforma Gross NPA ratio and proforma Net NPA ratio would have been 3.42 percent and 1.93 percent, respectively. This means, in reality, the bad loans have gone up.

Sure, the bank has made provisions accordingly. But, the stress on the book is evident.

Secondly, there was a technical loan write off of Rs 134 crore seen in the third quarter. This too would have helped to show a lower NPA number.

The deterioration in asset quality on CSB’s books is indeed a concern. The future scenario will depend on the economic recovery on the ground.

Gold shines

Loan book has grown largely due to the swelling gold loan book. Gold loan portfolio has grown 60 percent in the third quarter on a year-on-year basis and now constitutes 40 percent of the loan book compared with 30 percent a year ago and about 37 percent in Q2.

Corporate loans have shrunk, now constituting 23 percent of the book compared with 27 percent in the year-ago quarter and largely the same as in the second quarter. The other focus areas include retail loans, mainly two-wheeler loans.

High reliance on gold loans is not surprising for a Kerala-based bank where gold loan is a fast growing business. There is tough competition for CSB in this department from other Kerala-based private sector lenders and NBFCs such as Muthoot Finance.

Gold is a safer asset to lend against and recovery rate is pretty high. But, even here the bank has seen some signs of stress. According to the analyst presentation, the accounts which are in standard category due to the SC order amounts to Rs 210.62 crore. Of this, gold loans constitute 62 per cent. That tells us a lot.

Going ahead CSB will have to pay close attention to asset quality as the real impact of COVID-19 is not yet visible on the balance sheets of banks due to the impact of loan moratorium and loan restructuring. Next few quarters should offer clarity.