CSB Bank's Q2 FY26: Strong Growth and Tech Transformation Drive Performance

CSB Bank Limited has reported an impressive all-around performance for the second quarter of Fiscal Year 2026 (Q2 FY26) and the first half of FY26 (H1 FY26), demonstrating robust growth across key financial metrics. The bank's strategic focus on system stabilization and calibrated growth has yielded significant improvements, positioning it strongly for its ambitious SBS 2030 vision. The Board of Directors took on record these financial results, which were subject to limited review by Statutory Auditors, on November 5, 2025.

The bank's total business witnessed a substantial 27% year-on-year (YoY) growth, underpinned by a 25% YoY increase in deposits to INR 39,651 crore and a 29% YoY rise in net advances to INR 34,262 crore. This growth significantly outpaced industry trends. Profitability soared, with operating profit growing by 39% YoY and 27% quarter-on-quarter (QoQ) to INR 279 crore. Net profit after tax (PAT) also saw a healthy increase of 16% YoY and 35% QoQ, reaching INR 160 crore. This strong bottom-line performance was primarily driven by a 15% growth in Net Interest Income (NII) and an impressive 75% growth in other income. The Net Interest Margin (NIM) improved to 3.81%, and Return on Assets (RoA) stood at 1.33% for Q2 FY26.

Strategic Pillars and Technology Transformation

CSB Bank's robust performance is deeply rooted in its strategic pillars: governance, compliance, customer orientation, technology, and people/culture. The bank has made significant strides in its technology transformation journey, with the first phase, including a complex CBS migration, now stable. This foundational work is critical as the bank prepares for its 'Scale Phase' from FY27, aiming to emerge as a midsized bank with a national presence by 2030. The second phase of tech transformation is already underway, focusing on OFSAA, OBTFPM, OBDX enhancements, and integrating numerous surround systems with Flexcube. This extensive digital overhaul is expected to pave the way for future growth and efficiency.

Management highlighted that the bank is actively rolling out its retail journey, with Loan Origination Systems (LOS) and Loan Management Systems (LMS) already implemented for most retail asset products. The focus for FY27 onwards will be on building a strong retail liability and asset franchise, including vehicles, CV, CE, LAP, and LAS, as well as agricultural segments like KCC/tractors. The bank is also strategically running down its repledge business in retail advances due to a conservative interpretation of RBI policy, demonstrating proactive risk management. This strategic shift, while impacting short-term retail growth, aligns with long-term stability.

Asset Quality and Outlook

Asset quality showed marked improvement in Q2 FY26. Gross Non-Performing Assets (GNPA) stood at 1.81% (down from 1.84% in Q1 FY26), and Net Non-Performing Assets (NNPA) improved to 0.52% (down from 0.66% in Q1 FY26). The Provision Coverage Ratio (PCR) also strengthened to 84.14% (with PWO) and 71.62% (without PWO). The bank maintains a robust capital structure, with a Capital Adequacy Ratio (CRAR) of 20.99% and Tier 1 ratio of 19.19%, well above regulatory requirements. Management noted that NIMs have bottomed out and are expected to stabilize in the 3.7% to 3.9% range for the rest of the year. Credit costs are guided to remain between 40 to 50 basis points in the long term.

Management's Vision and Future Growth

The management expressed confidence in the bank's trajectory, emphasizing that the current investments in people, distribution, systems, and processes are aimed at creating a strong foundation for future scale. They anticipate a growth rate of 25% to 30% in overall assets, contingent on liquidity and market conditions. The gold loan portfolio, a significant contributor, is projected to be between 25% to 30% of the total AUM by 2030, with a new focus on the SME segment using gold as collateral. The bank also plans to add 50-60 branches annually, aiming for a network of 1,000 branches. Despite high operating expenses during this investment phase, the management expects a sharp decline in the cost-to-income ratio from FY28 onwards as these strategic initiatives begin to yield full returns. CSB Bank's Q2 FY26 performance underscores its disciplined execution and strategic clarity, reinforcing investor trust in its journey towards becoming a leading private sector bank with a national footprint.