Fuelling Middle-Class Dreams through Strategic Growth

Capital Small Finance Bank Drives Growth by Focusing on Middle-Income Segment and Strategic Expansion

· Plans to add 24 to 26 branches in the current year

New Delhi, June 28, 2024: Capital Small Finance Bank, India’s first small finance bank headquartered in Jalandhar, Punjab, is committed to a retail-centric business model built on strong customer relationships and a comprehensive banking approach. The bank employs diversified and secure lending practices, with a special emphasis on serving rural and semi-urban areas as well as the middle-income segment. Capital SFB strategically targets the middle-income group (MIG) in India, identifying this demographic as a significant driver of economic growth. We believe India is poised to achieve high middle-income status in the near future. In this economic landscape, the bank is well-positioned to capitalize on the rise of the middle-income segment, focusing on becoming the primary bank for clients within this group.

The bank has a well-diversified loan portfolio comprising of 37% agriculture, 26% mortgage, 19% micro, small and medium enterprises (MSME) and trading book, 9% corporate loans to NBFC, MFIs, etc and the remaining book of consumption & other loans required to fulfil each and every need of the client. Capital SFB dedicates a significant portion of its lending portfolio to support the MSME sector, empowering them to grow and contribute to the broader economy. Among the peers the bank distinguishes itself, allowing it to tailor products and services specifically for its market.

The bank distinguishes itself with a highly secure lending portfolio, where 99.9% of loans are collateralized, predominantly backed by immovable property or bank fixed deposit receipts. Notably, the bank maintains zero direct exposure to microfinance. This robust risk management strategy, supported by strong underwriting capabilities and diligent cash flow monitoring, has resulted in exceptionally low non-performing assets (NPAs) and negligible write-offs since its inception.

On the liability side, the bank’s focus remains primarily on retail deposits, constituting 92.9% of its total deposits. Capital SFB consistently achieves a Current Account Savings Account (CASA) ratio of 38%-41%, with term deposits enjoying a high roll-over rate exceeding 90%. Offering competitive rates such as 3.5% on savings, the bank manages its deposit cost effectively, recorded at 5.6% for FY24.

Financially, the bank closed FY24 with a Profit After Tax (PAT) of ₹111.5 crores, marking a 41.9% growth since FY19 and achieving a Return on Assets (ROA) of 1.3%. With an average Credit Deposit (CD) ratio of 79% and an interest spread of 5.6%, the bank navigated a rising interest rate environment, impacting deposit costs while maintaining annual loan resets.

Looking ahead, Capital SFB aims to expand its secured loan portfolio by targeting existing and new markets, alongside adding 24 to 26 branches in the current fiscal year, with a focus beyond Punjab. The bank targets a 22-24% increase in its loan portfolio for FY25 to enhance its CD ratio. Accelerating its credit-to-deposit ratio aims to boost Net Interest Margin (NIM) and other income, supported by operational efficiencies, branch scaling, and leveraging bancassurance for cross-selling.

Emphasizing customer convenience, the bank enhances service delivery through seamless digital banking solutions via its mobile app and online platforms. With a steadfast commitment to inclusive growth and customer-centric banking, Capital Small Finance Bank is strategically positioned to drive economic development across its targeted regions, particularly focusing on the middle-income group.

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