CSB Bank Q4 Review: High Fee Lines Offset NIM Pressures; Dolat Capital Maintains 'Buy', Hikes Target Price

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Dolat Capital Report

CSB Bank reported a beat on numbers despite sharp sequential net interest margin decline (-35 bps QoQ), benefitting from strong fee growth (+84% YoY) and high treasury gains from excess liquidity. The increase in credit costs to 76 bps was partly led by improved PCR (+700 bps QoQ), and partly by rise in slippages from unsecured retail book (3.3% of loans).

Loan growth at 10% QoQ was broad-based with gold, SME, and corporate book up 8-14% QoQ each.

While excess liquidity in Q4 impacted NIM, the bank reported higher treasury gains on account of the same. Margins have bottomed outwith a large part of FDs expected to re-price in next two quarters and inelastic gold yields, NIM trajectory should improve hereon. Loan growth to sustain above high teens, with RoA guidance at 1.5-1.8%.

The upward revision in earnings of ~5% for FY26/27E is mainly led by a higher base of FY25, despite factoring lower NIM assumptions (partly offset by higher fee lines).

Maintain ‘Buy’ rating with a target price of Rs 450 (1.4x FY27E price/adjusted book value) against RoA/RoE of 1.6%/17%.

CSB is an exception where downside risk to NIM is low in a declining rate environment.

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