CSB Bank Sees Margins Around 4.5% For Remainder Of Current Fiscal

A branch of CSB Bank in Mumbai. (Photo: Usha Kunji/ NDTV Profit)

CSB Bank Ltd.'s net interest margin to remain in the range of 4.5% to 4.8% for the upcoming quarter of the financial year, Chief Executive Officer Pralay Mondal said. The private sector lender had a slightly "soft quarter" in terms of margins and certain financial parameters in the first quarter of the current financial year, but it was a one-off kind of situation, according to the managing director.

"Specifically last quarter, there was a regulatory change that happened for penal interest," he told NDTV Profit. "Penal interest can no longer be taken on an accrual basis. It has to be converted to penal charges, which we are doing from this quarter onwards."

"I think our Q2, Q3, and Q4 numbers will be a lot better than the first quarter. Having said that, there's a structural shift that has happened; that's why initially, we were saying 4.5% to 4.8% for margins. Now, we are giving guidance at the lower end of the range. It will be closer to 4.5% going ahead," Mondal said.

Overall, for the whole year, the guidance remains intact and whatever blip the bank had in the first quarter should be made up in the next few quarters, the CEO said.

On a return-on-investment basis, the Thrissur-based bank will be net neutral from the second quarter of FY25, Mondal said. He claimed that the bank had met its goal of growing 30% faster than the system in Q1. CSB Bank's deposits grew by 21% and its assets grew around 18-19% in the June quarter.

"Some of this compression on margins will get reflected in the penal charges, which will come on the fees side. On an RoI basis, we will be net neutral as a bank, second quarter onwards," the CEO said.

"I think from a bank's perspective, we had given our guidance that we would grow faster than the system by at least 30%, which we have done in the last quarter. Our deposits grew by 21%, assets grew around 18–19%, and I think we should be able to sustain that, if not better that, in the next few quarters," Mondal told NDTV Profit.

Mondal said the bank has accelerated its journey towards its 'SBS (Sustain, Build, Sale) 2030' goal, and their strategy is to become a mid-sized lender with a national presence by 2030. He added that the private sector lender has also recently invested ahead of time in a wholesale franchise, which it had initially planned to do in FY26.

"What we have done is we have also invested ahead of time in a wholesale franchise, which we had thought we would do FY26 onwards, but that is also starting to play out. Last quarter is an aberration for the whole year. We should be able to do better," Mondal added.

Mondal also projected that the remaining quarter of FY25 will be better for the bank. He added that CSB Bank will make up for its Q1 performance in the remaining quarters of the year.