CSB Bank shares have fallen by about 15 percent in the last one month. This decline has surprised, as about half of the gold loans in the bank’s loan book. There has been a huge bounce in the prices of gold. Gold prices have created new height records. The question is, what could be the reason for the decline in CSB Bank shares?
Weak performance in June quarter
CSB Bank The performance of the June quarter has not been good. This has affected its shares. During this period, the returns of the bank have fallen to 1.03 percent. It was 1.27 percent in the same period of a year ago. Pressure on margin and higher credit costs have affected the bank’s ability to earn profits. However, the bank’s net advans increased by 31 per cent year -on -year basis in the June quarter. This is much higher than the growth of about 10 percent of the industry.
Gold loan share 46% in loan book
The reason for good growth in the bank’s advans is an increase of 36 percent in gold loans on a year -on -year basis. At the end of June 2025, the Gold Loan stake in the bank’s loan book was 46 per cent. The good thing is that the loan growth of the second segment of the bank has also been good. The loan growth of all the segments except retail was more than 30 percent. Retail loan growth was 19 percent by removing the goal loan. The growth of CSB Bank’s deposit was 20 per cent on a year -on -year basis, which would be said to be good.
Pressure on net interest margin continues
The bank’s net interest margin (NIM) has been under pressure from some quarters of the past. It decreased to 3.54 percent in the June quarter. It was 3.75 percent in the same period of a year ago. It is closer to the trend of the industry. The bank’s management estimates that NIM will reach 3.5 to 4 percent in FY26. From the second quarter of FY26, improvement will be seen in it. Bulk/wholesale funding is behind this confidence, which holds about 35-40 per cent stake in liability.
Gold portfolio advantage
CSB Bank gets a lot of benefit from its gold loan portfolio. The reason for this is that the yield is relatively high, the credit cost and the risk weight are low. The bank has planned to keep gold loan advans above 45 per cent in Near to Medium Term. The Gold Loan stake in the total advans of the bank is expected to decrease by FY2030. Currently, trading is being done at 1.2 times the estimated book value of FY27 in CSB Bank shares. This valuation seems attractive.
Should you invest?
Excoction risk remains. Despite this, this stock looks attractive for long term investors. Since CSB Bank promoter Fairfax has also shown interest in the acquisition of IDBI Bank, which could lead to merger of it with IDBI Bank. Its shares can show its effect.