The Kerala-based mid-sized lender CSB Bank (formerly Catholic Syrian Bank) on Monday reported a muted 5 per cent growth in net profit to Rs 156 crore despite record margins and a 26 per cent rise in advances for the quarter to December.
Led by a hefty 51 per cent jump in gold loans, its total advances grew 26 per cent to Rs 18,456.70 crore, while deposits rose 19 per cent to Rs 22,664 crore.
CSB Bank has over 45 per cent of its assets in gold loans.
During the reporting quarter, its gold loan book soared 51 per cent to Rs 8,780.30 crore from Rs 5,825.50 crore a year ago, the company said.
It's very high gold loan exposure, which works out to be 45.4 per cent of its overall loan assets, giving the lender an industry high 5.8 per cent net interest margin (up marginally on-year), which the managing director and Pralay Mondal said is not sustainable as the bank will have to offer better pricing to its depositors going forward.
This record high margin pushed up its core net interest income by 15 per cent to Rs 350 crore from Rs 303 crore a year ago.
"Even after we complete our seven-year growth roadmap by FY27, we still will have at least 25 per cent of our assets in gold loans," Mondal told PTI from his headquarters in the central Kerala city of Thrissur over phone, discounting any risks to the bank's balance-sheet due to the heavy reliance on one asset base. No other commercial bank has such heavy dependence on one asset class.
Explaining the tepid profit numbers, the chief financial officer of the bank BK Divakara said the net income would have been higher by over Rs 11 crore, had it not been for 100 per cent provisioning made for the security receipts, following the revised RBI guidelines on the same issued last September.
Instead of making staggered provisions towards this, we thought of fully providing for at one-go and as when the SRs mature, the entire money will come back to the profit book, he said, adding non-core income also performed well growing 65 per cent.
However, the bank made progress on the asset quality front with reduction in both gross and net bad loan ratios.
While gross NPAs declined to 1.45 per cent from 1.65 per cent or Rs 271.3 crore, net NPAs also marginally improved 0.42 per cent from 0.57 per cent at Rs 77.7 crore.
The bank's provision coverage ratio improved to 91.93 per cent from 90.1 per cent a year ago and a core capital base stood at 25.78 per cent.
Mondal said the bank will be commercially launching credit cards this quarter and wants to build a strong franchise on this product. To diversify the asset base the bank will be adding 100 more branches each this and next fiscals.
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