CSB Bank Q3 Earnings Call - Key Takeaways - YES Securities

- Collection on Demand at 95% in December - it was consistent through Q3 FY21

- Provisioning @ 25% held towards SC standstill accounts (Rs2.1bn), non-GL SMA pool (Rs3.8bn) and standard restructured accounts (Rs0.8bn)

- Of the above-mentioned non-GL SMA pool, more than 50% is in SMA-0 and overall flow forward to 90+dpd is expected to be limited as economic situation is improving - this non-standstill pool itself is 40-50% lower than pre-Covid times

- Of the SC stand-still accounts, GL comprises 62% which would be comfortably recovered

- Nothing much was done under RBI Covid restructuring package - marginal restructuring of SME and Personal Loans (school teachers) - bank open to restructure viable accounts even if it calls for classification downgrade

- FITL is 35cr and most paying as per schedule

- NIM improved to 5.2% - management believes that it has peaked - margins will come down gradually when volume growth happens in SME, Retail and Corporate segments - guidance is to maintain 4%+ NIM

- Bank targeting minimum 25% pa loan growth from FY22 given its small size and strengthened team and product portfolio

- GL (41% share - was up 14% qoq/60% yoy) was the prime driver of loan growth in Q3 - here the portfolio expansion was supported by LTV increase and steady tonnage accretion - portfolio LTV reached 75% with December disbursements done at 82% LTV

- Offering maximum 82% LTV for 1-year GL product - normal GL life is 4-6 months - the bank has sales force and GL managers at many branches who have come from GL NBFCs

- Some Corporates, NBFCs and HFCs have repaid loans as their loans were re-financed by large banks at much lower rates - CSB lost a vintage large SME relationship too

- SME portfolio will start to grow from Q4 with the recent joining of a new business head - the new leadership is working on volume growth by way of improved sourcing strategy, leveraging of the branch network and customized product delivery

- New retail vertical with a complete product suite and revamped policies will be established shortly - the bank would be relaunching LAP and will add more retail products in FY22

- Share of GL in loans will come down in coming years due to take-off in other products/segments - the bank will not de-emphasize on GL business as its loss experience has been much better than the industry

- Higher staff cost in Q3 driven by higher AS-15 provisions related to pension on expected DA increase

- Latest VRS plan to cover 223 employees is being implemented - associated one-time P&L hit will be Rs0.8bn in Q4, if VRS taken by all - but there will be long-term benefits

Source : Equity Bulls

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