This private sector lender saw sharpest intra-day surge in 10 months

The sustenance of gold business as a proportion of book coupled with gradual improvement in non-gold segment to bring diversification and steady RoA are key triggers for future price performance.

Shares of CSB Bank soared 13 per cent to Rs 254.15, its sharpest intra-day surge in the past 10 month, on Tuesday, amid heavy volumes. Earlier, the stock of private sector lender had rallied 13.5 per cent on May 6, 2022 in intra-day trade, the BSE data shows.

At 02:27 pm; CSB Bank traded 9 per cent higher at Rs 245.75, as compared to 0.70 per cent rise in the S&P BSE Sensex. The average trading volumes on the counter jumped five-fold as around 2.5 million shares that represented 1.4 per cent of total equity of CSB Bank changed hands on the NSE and BSE. The stock had hit a 52-week high of Rs 275 on December 19, 2022.

Recently, the stock has corrected from Rs 275 and maintained near its 200 DMA, which is around Rs 224 and is now breaking above the 50 EMA zone, with a positive bullish candle pattern on the daily chart, according to technical analyst at Prabhudas Lilladher.

"There has been multiple support around Rs 220 levels. The RSI is also well placed and is on the rise, with potential to carry on the momentum even further to the upside. We suggest to buy and accumulate this stock, with an upside target of Rs 260–275, and stop loss near Rs 220," the brokerage firm added.

CSB Bank is a south based private sector bank, where Kerala contributes around 30 per cent of total advances. The changed strategy in various aspects of lending have led to a transformation and improved performance in the past few years. Gold and SME are key lending segments that comprises of ~45 per cent, ~12 per cent, respectively, of the book.

Analysts at ICICI Securities believe that the continued focus on gold loans and gradual improvement in non-gold segment will drive sustainable growth. CSB bank, they said, is expected to deliver credit growth higher than industry, with RoA of ~2 per cent plus.

"Investment in branches, employees and technology to keep opex elevated in the near term will accrue gradually. The on track performance and gradual ramp up in liability franchise will also aid business growth. The key triggers for future performance are sustanence of gold business, gradual improvement in non-gold segment, and steady RoA," the brokerage firm added, with a revised target price of Rs 300 from Rs 275.