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Hidden Gem CSB Bank (CMP: ₹ 429, Market Cap: ₹ 7,443 crore; Target Price: ₹ 500)

ICICIdirect Research 07 Nov 2025 DISCLAIMER

CSB Bank is a south based private sector bank with Kerala contributing ~19% of total advances. Gold loans form substantial proportion - 47% of the book.
CSB Bank delivered a strong Q2FY26 performance with advances up 29% YoY to ₹34,712 crore, driven by gold (+37%), SME (+31%), and corporate (+32%) segments.
Bank regained momentum after a soft Q1FY26, with NIMs improving 27 bps QoQ to 3.81%, led by higher gold loan yields, improved mix in wholesale and SME segments, and faster repricing of bulk deposits. Directionally, margins are expected to remain within the guided range of 3.7–3.9%, assuming no further rate cuts.
Overall, strong disbursement momentum (50% YoY) across segments aided robust fee income growth (101% YoY) which partially offset lower treasury gains.
Operating expenses remained elevated due to continued tech investments, with the CI ratio at ~63.9%, expected to stay in 60–65% range through FY27E before improving as scale benefits materialize. Although, RoA improved ~30 bps QoQ to 1.33%, led by revival in margins and stable asset quality.
Factoring ~60% fixed rate loan book, stable margins at 3.7-3.9% and sustained business momentum. We expect credit growth to remain healthy at ~23-25% CAGR with RoA at ~1.4-1.5% ahead, valuing CSB Bank at 1.4x FY27E BV. We have a BUY rating on the stock with a target price of ₹500

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