There has been news in the media for quite some time of the disinvestment of IDBI Bank by the Government of India. While the Government of India controls 94.7% of IDBI Bank, it intends to sell all or part of its stake and hand over management control to the new buyer. The government has sounded out large institutional buyers, including Fairfax Financial Holdings, owned by Canadian billionaire Prem Watsa. Since, Fairfax already owns a 49.7% majority stake in CSB Bank and in case it wins the bid to take management control and buy IDBI Bank, then it would possibly merge the same with CSB Bank, creating a large banking entity 10 times the size of CSB bank in terms of asset base. The combined banking entity could have a loan book size of over Rs 1.50 lac crore and an asset base of around Rs 3 lakh crore. CSB Bank Limited, formerly known as The Catholic Syrian Bank Ltd, was established in 1920 and is the oldest private sector bank in Kerala. The Bank has grown from strength to strength in the last hundred years, adapting admirably to the far-reaching social, political and economic changes that have taken place during the period. The bank became a Scheduled Bank in 1969 when it was included in the Second Schedule of Reserve Bank of India Act, opening its first branch in Mumbai in 1972. Currently, the bank has over 600 branches and is spread across 18 States and 2 Union Territories. CSB Bank has a long operating history as a traditional bank but it is now focusing on initiatives to transform itself into a full service contemporary bank. Hence, it has undertaken a number of initiatives to enhance its business focus by upgrading processes, technology and human resources, having organised its operations under separate business areas such as: re-aligning, training and incentivising employees; creating new products and services; increasing sales and marketing efforts; investing in technology and strengthening the monitoring and risk management. CSB Bank is backed by FIH Mauritius Investments Ltd, a subsidiary company wholly owned by Fairfax India, part of the global Fairfax Group. The Bank rebranded itself in the year 2019 by changing its name from The Catholic Syrian Bank Limited to CSB Bank Limited, and this was done to address region and community related perceptional issues associated with the previously held brand name. The Bank came out with its Initial Public Offering in the year 2019 with an issue size of Rs. 409.67 crores. It received an overwhelming response from the investors and the issue was over-subscribed by 86.92 times. Subsequently, the Bank’s shares were listed on the Indian stock exchanges on 4 December 2019. With a client base of more than 1.5 million customers, the Bank currently has four principal business areas, namely, SME Banking, Retail Banking, Corporate Banking and Treasury Operations. The financial performance of CSB Bank for the quarter ended 30 June 2022 has been quite impressive. In terms of capital adequacy ratio, it is one of the best in the industry at 25.46% while the asset quality—Net NPA is at a historical low at 0.60%. On a net income of Rs 311 crore, the net profit has gone up by 88% on a year on year basis to Rs 114.50 crore from Rs 61 crore. Looking at shareholder ratios, CSB Bank has shown elevated results for Q1FY23 with the Book Value going up to Rs 151 and Earning per Share at Rs 26.8.
Analysts expect the financial results for the next 3 quarters to be excellent going forward and also a positive for shareholders in case of the buyout of IDBI Bank by the Fairfax Group. The CSB Bank stock currently quotes at Rs 222 and is a good buy for portfolio investors for a one year investment time horizon.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.