CSB Bank Q4 Results Review - Net Interest Margins Moderate; Profitability Continues To Shine: Dolat Capital
Growth trends broad based; Impressive asset quality.
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Dolat Capital Report
CSB Bank reported lower net interest income growth of 15% YoY, impacted by 40 basis points sequential decline in net interest margin to 5.4%. However, higher other income and lower credit costs aided pre-provision operating profit and profit after tax growth of 42%/20% YoY, with superior return on asset at 2.2% for the quarter (ahead of estimates).
Though cost of fund increased by 55 basis points QoQ, they were up only 5 bps on a full year basis.
Loan growth at 11% QoQ was broad based, with small and medium enterprise book up 9% QoQ, corporate 10%, and gold at 10%. Core fee lines showed significant traction, up 44% QoQ. Excluding treasury, other income/assets averaged at 1.2% in FY23 versus 1% in FY22 despite muted priority sector lending certificates gains.
CSB Bank's asset quality metrics continue to fare well with annualised slippages at 0.7% and strong recoveries aiding negative credit costs (down 18 bps).
We factor in higher other income offset by slightly higher opex, with earnings upgrade of 6-8% over FY24/25E.
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