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Dolat Capital Report
CSB Bank reported in-line operating metrics with lower net interest margin at 4.3% offset by improved opex and higher fee lines. Asset quality metrics were steady with slippages at 1% and RoA at 1.5% remained within the guided range.
The inability to raise asset side yields coupled with continued rise in cost of fund (+17 bps QoQ) resulted in stable NIM QoQ (-6 bps).
Management lowered NIM guidance to 4.3-4.5% (4.5-4.8% earlier) but maintained RoA of 1.5-1.8% with credit costs at ~30 bps in the near term. We build in ~25 bps lower NIM versus earlier over FY25-26E, partly offset by higher fee assumptions and improved opex assumptions.
We downward revise FY25/26E earnings by 6-8% and maintain ‘Buy' rating with a revised target price of Rs 400 (from Rs 420 earlier), valuing the bank at 1.4 times Sep-26E price/adjusted book value against RoA/RoE of 1.6%/15%. With a largely secured book (half of which is gold), CSB remains a safer bet amidst a normalising credit environment.
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