CSB Bank Limited (NSE: CSBBANK) Q2 FY23 Earnings Concall dated Oct. 21, 2022
Corporate Participants:
Pralay Mondal — Managing Director & Chief Executive Officer
B K Divakara — Chief Financial Officer
Analysts:
Manish Shukla — Axis Capital — Analyst
Mona Khetan — Dolat Capital — Analyst
Pruthul Shah — Anubhuti Advisors — Analyst
Anuja — Elara Capital — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the CSB Bank Q2 FY ’23 Results Conference Call hosted by Axis Capital Limited. As a reminder, all participant lines will be in a listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Manish Shukla from Axis Capital. Thank you, and over to you, sir.
Manish Shukla — Axis Capital — Analyst
Thank you, Kathy. Good evening, everyone. On behalf of Axis Capital, I welcome you all to this call. From the management team, we have with us Mr. Pralay Mondal, MD and CEO; and Mr. B.K. Divakara, CFO; and other colleagues from the management team.
I would request Mr. Mondal to make a few opening remarks, and after that, we can open the floor for Q&A. With that, over to you, Mr. Mondal.
Pralay Mondal — Managing Director & Chief Executive Officer
Thank you, Manish, and thank you, everybody, for joining the Q2 earnings call for FY ’23. I wish to start with wishing a very, very happy Diwali to everybody and their family in advance. Coming to our bank results, I would like to just talk a little bit briefly about how — what’s happening, what kind of an environment we are in, both globally and in India, and then straight get into specifics of our results, and also give a little bit of a brief of what our medium-term and long-term vision is, because more than a quarter result, I think, for our bank, the key story is about what we want to do in the medium and long term.
So, starting on the global side, we all know that we are going through post-COVID, a very different kind of a challenge with global growth being animate with all the — all kinds of issues there. This interest rates are just skyrocketing. Inflation is skyrocketing, whether it is in U.S., whether it is in Europe. The U.S. 10-year yield has cross 4%, 2%. Our 2-year yield has skyrocketed yesterday also same. U.S. dollar index is volatile, but very, very high. Indian rupee has also now crossed INR83, which is a concern. It also — issues on CAD and things like that. So, I think we are passing through a fairly volatile uncertain kind of a situation globally. And while India is relatively in a better place to be in and more stable, but we cannot be completely away from some of the global challenges. And that is shown once the FOMC places the interest rates, which again is expected to be anywhere between 75 basis points to 100 basis points, and they have given. They are constantly keep on raising the bar in terms of where they can go.
RBI also, to some extent, has to follow. Though our inflation, I think, they have already said that they sort of peaked and various NPC commentary has been showing that things are sort of stabilizing on a higher base. I think growth is coming back. I see that the banking credit growth this quarter should be somewhere around 18% to 19%. And as RBI Governor has already said, that going forward, monthly policy will remain watchful, stability while supporting growth.
Having said that, India has always have challenge of this oil price and oil price is right now stable, but there are various OPEC announcements pending by U.S. oil. Reserves are expected to be not so high at this point of time. So we have to wait and watch how the oil price and impacts comes. We had significant outflow from the country. In terms of FII, it came back. And again, this quarter — this month, outflow has also been slightly high. So to that extent, I think we have this volatility. And in this volatility, I think the banking ecosystem has done extremely well for us as a country. And more and more results are coming. I’m seeing that broadly, this has been a good quarter for most of the companies, and hence, we remain very, very positive and hopeful that we are in a good place at this point of time.
With this macro, I will just get into CSB’s specifics. You probably have already got the numbers, but I’ll state, go through them, the key numbers a little bit. So, we had a significant improvement in net profits, 31% year-on-year [Technical Issues] but — and Mr. Divakara will explain later on as and when those questions comes up on our operating profits and things like that. There are certain factors, which kept our operating profit little muted. For the quarter ended, net profit is 5% higher than last quarter at INR120 crores. Provisioning buffer of around INR200 crores, over and above the regulatory requirements, because we take accelerated provision, we also have COVID provision, which you call it INR106 crores. We could maintain again, I mean, about 5% on a yearly basis, 5.6% and 5.38% on a yearly basis and quarterly basis, 5.6%. So last quarter was one of the highest NIM for us at 5.6%. But I’ll come back to this that, obviously, this is not sustainable.
ROE improved from 1.53% in H1 ’22 to 1.81% in H1 ’23, while sequentially, we improved from 1.75% to 1.87%. So broadly, we are in line with what I keep talking that we’ll be between 1.5% to 1.8%. We are in that range. Liability growth is gradually coming back. So CASA growth was 16%. Overall growth was — deposits was little more than 10%. Cost of deposits reduced from 4.39% in H1 FY ’22 to 4.14% in FY ’23, though gradually we are seeing that this will start picking up now, which will impact, to some extent, the NIM over a period of time.
Net advances growth has been positive. It has been 24% Y-o-Y and 8% Q-o-Q. And this is one of the things which I have been telling everybody that we will focus on growth and quality growth, while we keep up sharp reserve focus on our credit quality. So, year-on-year 24%, and Q-o-Q, 8% says that we have been consistent in terms of what we are promising. But we will continue to try and grow faster than the system.
Gold portfolio registered growth of 47% and yield on advances was at 10.7%. On the asset quality side, things improved further. So GNPA was 1.65%; NNPA, 0.57%; PCR, 90%. PCR, this, of course, includes the write-offs, so if you take that out, it will be marginally below 70%. Contingency provisions accounted in the books is higher than NNPA, continuing with the accelerated NPA provisioning, as I said before.
Robust capital base. There are very few banks who has a capital base of more than 25% and ROE more than 18%. So, this, of course, is possibly to a great extent because of our large size of the golden portfolio. And this, again, is not sustainable as we grow the mix of other businesses over a period of time. Shareholder value creation from that perspective, book value per share has reached INR1.58; EPS, INR27.1; ROE of 18.49%, which I just mentioned before. And we continued to open our branches, so this year also we opened 100 branches, 81 locations already approved, work in progress. We are confident of opening 100 more branches this year, and we’ll continue to grow at least by 100 branches every year, if not more. And there’s a significant investment planned and the execution has started in a big way on technology, whether it is LOS, core system migration processes, thinking, LMS, the entire surround system. So, we are thinking significant investment into the technology stack.
So, those are for the numbers, slightly on the midterm to long term what we are planning. I don’t think the commentary is changing and I hope it doesn’t change in the next three to four years, because one thing what I have learned in banking is, be consistent and ensure that we deliver every quarter what we promise. So, we continue to invest. So as per our SBS strategies; Sustain, Build and Scale, 2030 vision, we have clear vision where we want to reach, how we will reach there in 2030. We want to have a sustained growth. I said that before that, in the next three years, CAGR of 25%, give and take a little bit here and there. And post that, higher growth, hopefully. That time, we’ll be sure to have all our technology stacked, credit processes, entire collections ecosystem, which helps us in building our retail businesses, the payments ecosystem, the SME, and also, we are starting to invest into a little bit on transaction banking, both in terms of leadership, processes, technology, everything. So, by 2024, FY ’24, we should be ready with all that. And then, next two, three years, we will start building those businesses. And last three years of the — now, this decade, which is SBS 2030, we should have a hockey stick approach in terms of retail growth and SME growth. So, because by that time, we’ll have everything ready’ technology, distribution, leadership, processes. And then, it’s a multiplier effect, because one leads to the other, as we all know what happens in a banking ecosystem. So, we are looking for that hockey stick somewhere between ’27 and ’30. And hence, directionally, while our cost-to-income where is today, I’ve always said that it will be within 55% to 60% and I don’t mind me taking closer to 60%, provided most of those are happening because of investments and not because of cost. Cost will be managed through productivity. Investments will be managed through payback period of those investments. And if we do the right Is in the cost-to-income, in cost, I means investment, not income, right investments, then we hope that by end of this decade, we should be able to bring the cost-to-income below 45%. So that’s the [Technical Issues].
We’ll also ensure that the business mix is more balanced. So again, exit 2030, we should have highest portion of the book should be retail, more than 30%. And then between gold, SME and wholesale, the rest will be shared equally or little with 1% or 2%, 3% here and there. So that’s the thought process. But right now, as you see that, as I have said before, that gold proportion is only going up. And it can go up to 45% before we start rationalizing, but it will not go beyond 45%, because we also need the income to [Technical Issues]. The other important thing is, we will continue to focus on other income to non-interest income to total income. There, our proportion is very low, and we want to take it up. And this year, there’s a specific — this quarter, there’s a specific question, why is this low, because if you take out the year-on-year PSLC income, which is a special income and the treasury income, which is negative this quarter for various business, including SR and including some of the other reasons, treasury bills and things like that, we booked some losses strategically. Our actual core non-interest income actually has grown by 48%, I think. So, which is — and that is the mission, right? That will continue to grow because as we add more products, more transaction banking products, retail products, payment products, third-party businesses, more customers coming into the system and customer acquisition is going to be one of our key focus areas. Then, we expect our ability to grow the non-interest — core non-interest income to the total income, and then even if we have our — which will happen, even if our NIM comes down, which will happen, our ROE will sustain between 1.5% to 1.8%, primarily because of some of these fee income that will continue to grow. And that is typically how the market operates. So, we cannot be an outlier. As we grow, we have to be part of the system, so we’ll continue to grow.
The other important focus, and this is my last statement before I open it up for questions and so, Divakara’s comments, if any, is can only happen, provided it is quality growth. It is — and I don’t see a challenge at all in the asset growth. So we have to fund it, so we have to have a significant focus on liability, whether it is CASA, whether it is actualized customers. And along with that, FDs generate, the regulatory will come, we’ll create focused structures on task, which is trust, associations, et cetera. We obviously do not want to depend too much on wholesale deposits, though we are giving targets to our SME and wholesale team to also be as self-funded as possible. But liability, quality liability and customer acquisition and customer franchise is key, because even if — when we tomorrow have the assets, products ready and we have the processes ready, we need a significant ways to cross-sell this too. And also today, we need to ensure that to retain our LCR and to sustain, to support a sustainable growth of faster than the system, we need a sustainable liability franchise. And hence, a lot of our focus is going into building the approach towards liability and how do we talk to customers and get those deposits.
In conclusion, I’ll say that, we will — we are very bullish about how we want to grow. We will be consistent. There will be — hopefully, there will be no surprises and shocks. When you look at the NPA slippages, again, a word on the credit cost, it looks negative, but obviously, negative credit cost is technically too good to be true. So, obviously, we will have, but some credit costs eventually coming in as slippages as we grow. But we will continue to have our gross and net NPA below 2% and below 1% over a period of time. And this quarter has been testimony to that, that we can hold on to a good performance on that and make it even better.
So, with that remarks, I would like to hand it back to — in case Mr. Divakara has any comments. Otherwise, we’ll hand it back to for questions from all of you. Thank you very much.
B K Divakara — Chief Financial Officer
No, we have — we have covered, Pralay. I don’t think anything needs to be supplemented. But during the course of question-and-answer session, if something is to be supplemented, I will do that.
Pralay Mondal — Managing Director & Chief Executive Officer
Sure, thank you. So let’s get into Q&A then.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Mona Khetan from Dolat Capital. Please go ahead.
Mona Khetan — Dolat Capital — Analyst
Yeah. Hi, sir. Good evening.
Pralay Mondal — Managing Director & Chief Executive Officer
Good evening.
Mona Khetan — Dolat Capital — Analyst
Yeah, hi. And Congratulations on a good set of numbers. Sir, firstly, my question was on the PSLC market. Sir, what exactly is going on? You mentioned in your comments about draining of opportunity. So, what exactly is happening there that’s lowering the PSLC income for us?
Pralay Mondal — Managing Director & Chief Executive Officer
So, it’s very simple, Mona, that we had booked PSLC income last year by now. But this year, what we have seen is that the pricing is not attractive right now to sell the PSLC, but pricing is very attractive to buy anything, which we need for micro and things like that. So, we have just done the reverse. So, we have bought what we needed to for the year, hopefully, and we have not sold anything, because we think by Q3, Q4, we will get a better price. So that’s earning which we expect to come and that’s a buffer which we are holding at this point of time. At the same time, I think last year, Mr. Divakara can confirm, I think we are around INR34 crores or INR35 crores…
B K Divakara — Chief Financial Officer
INR33.4 crores.
Pralay Mondal — Managing Director & Chief Executive Officer
INR33.4 crores. Yeah. So that is something which we have not yet booked this year, because the pricing is not attractive right now, but we have the pool which we can use.
Mona Khetan — Dolat Capital — Analyst
But as I understand, in Q3 and Q4, the pricing anyways becomes less attractive. So is it fair to say that the full year profit from PSLC book could be lower than what we’ve been seeing?
Pralay Mondal — Managing Director & Chief Executive Officer
No, cycles are different now. What else? Either everybody has done very well on PSLC suddenly or — so we can only know in the Q3 and Q4 what the story is. But we believe that we should be able to get better pricing in Q3 and Q4. It’s a call, which you have taken.
Mona Khetan — Dolat Capital — Analyst
Sure and coming to the gold book, so we have seen very strong growth, much higher than what we have seen towards the other banks and even mainstream NBFCs. So what really is helping such growth trends? And if you could give some sense on how much of these could be balance transfers from other entities, especially NBFCs, that would help.
Pralay Mondal — Managing Director & Chief Executive Officer
Sure. So our segment of customers is slightly different to the NBFC segment of customers. Like, as I said before that, the bigger banks work in a different segment and a different price yield kind of — our yields are different, our segments are different and this obviously there will be always a 20% overlap and things like that, so not too much. I know why you’re asking this question because there is a lot of noise on this right now, but frankly speaking, two things are happening in our portfolio. Our tonnage is increasing because price has not really been very volatile. It has remained similar kind of a price. So, obviously, tonnage has improved to that extent. And a lot of existing customers have brought in new tonnage to the bank as well as we’ve added lots more customers.
So it’s a function of execution what we have done well and this gives us the confidence that the branches are getting ready. Tomorrow, you will see that even liability, the branches are able to execute better. So question is, if somebody can execute better the gold, they can execute better the liability and tomorrow when you have the assets or SME or whatever else, they should be able to execute better. I think we are able to get better productivity of our branch right now because of execution focus, monitoring, leadership, on-ground excitement and things like that. That is what is helping us.
So I think it’s business as usual for us at this point of time and our portfolio is small. I mean percentages don’t say everything. So our portfolio is small. So even if you focus on it and do a little better, the growth automatically comes, but we are ensuring that we are not depending on this growth. So I have told very clearly because we don’t — this quarter, we want to grow slightly better on SME, a little more on the wholesale side and retail will take time because retail is a high road, it will take some time and we don’t want to depend on gold so much at this point of time. So I think that gold will be steady. Don’t expect that [Technical Issues]. There’s a lot of disturbance on the line.
Operator
Sir, there was a audio break from your end. Now we can hear you.
Mona Khetan — Dolat Capital — Analyst
Follow-up question on gold side again, with growth trends getting better across segments, the general credit environment getting better, do you see the competitive environment in this space get [Technical Issues] years?
Pralay Mondal — Managing Director & Chief Executive Officer
When you say better, what does it mean?
Mona Khetan — Dolat Capital — Analyst
In the sense that pricing is less competitive.
Pralay Mondal — Managing Director & Chief Executive Officer
Yeah. So it is bound to happen because once the liquidity has dried up in the ecosystem and cost of funding starting to go up, so some of the NBFCs, some of the banks, etc., will — easy liquidity is not there anymore. So pricing will have — the right pricing for the right risk and right operating cost will be put in place. So yes, I think that eventually, whether it is SME, whether it is gold loan, I think, even on — to some extent, in the mid-market where we operate on the wholesale side, we are seeing pricing rationality coming back.
Mona Khetan — Dolat Capital — Analyst
Sure. And just finally, on the SME book, again, despite a small base, we are not seeing — and a focus area for you, we are somewhat not seeing growth coming, so what is the outlook there? You just mentioned we are seeing growth from this quarter also, but what sort of growth trends could we build in? Or what sort of disbursements are we seeing in the last few quarters even if there are some run off, yeah.
Pralay Mondal — Managing Director & Chief Executive Officer
So what happens is — what I know this that both our retail and SME has a large component of an old book, okay? So some of them, we are allowing to — I mean, some of them naturally runs off, the TAM loans and on the [Technical Issues].
Operator
Excuse me, this is the operator. Yeah, we can hear you now, sir
Pralay Mondal — Managing Director & Chief Executive Officer
Yeah, I don’t know what is happening. So what I’m saying is, so we have significantly enhanced our credit governance on the SME side as well as on the wholesale side. We said that we want to do risk less pricing. We want to ensure that we do businesses at certain ratings and things like that. So we always had those policies, but we have implemented with a little more iron hands because we want a sustainable growth. So to that extent, some of the businesses, which are running off, we are happy. But the new businesses, which we are building is also very good quality. Our rating, best pricing, all of that is falling in place.
So we are putting a lot more science behind it, and hence, I would see that the second half of the year, we have done all that corrections in the portfolio in the last six months. I think the second half of the year, you will see our growth in the SME portfolio.
Operator
Ma’am, you’re done with your questions?
Mona Khetan — Dolat Capital — Analyst
Yeah. I was just asking, it should be in line with the rest of the book, the second half growth in SME?
Pralay Mondal — Managing Director & Chief Executive Officer
Yeah. I think SME should be having the growth in line with our bank growth, second half.
Mona Khetan — Dolat Capital — Analyst
Sure. Thank you, sir. That is very helpful.
Pralay Mondal — Managing Director & Chief Executive Officer
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Pruthul Shah from Anubhuti Advisors. Please go ahead.
Pruthul Shah — Anubhuti Advisors — Analyst
Yeah, thank you for the opportunity. My question is with respect to the overall industry growth. Like, if we see that large banks and small banks all are giving decent growth in — decent advances growth, but now that the interest cycle is going up, what is your understanding on credit growth going forward? And normally, how much time it takes to impact the economy? What is the lag in impacting the credit growth because of this interest up cycle?
Pralay Mondal — Managing Director & Chief Executive Officer
I am not sure I understood the question fully, but let me try. So credit growth is a function of various things, including the customer confidence, the salary growth. If you see some of the numbers on the savings on the consumer side, it has actually come down a little bit. The debt-to-GDP has actually gone up. So if you look at some of these numbers, people are having the confidence somewhere, and there’s a little bit of a pent-up demand as well because of COVID and some of the other stuff. There has been a muted demand, both on retail and SME in the last few years. And wholesale has been absolutely muted because — and still investments has not come back, FX has now did come back and things like that. Project finance, etc. are starting a little bit here and there.
But generally, the feel is that everybody is seeing that there is a growth picking up almost everywhere. I mean private investments should start coming in, capex should start picking up. So I think, generally, the view is that credit growth upwards of 15% because it’s typically — India has always done credit growth more than the nominal GDP. And today, even if you have a nominal GDP, if you have a credit to have the nominal GDP, you have to be somewhere around 15%. So given that perspective, I think we see a minimum of 15% growth credit cost going ahead. And we are saying — and yes, interest cycle, sometimes what happens the other way around that if interest cycle starts going up, it impacts the credit growth because sometimes the ability to repay or ability to consume is little lesser in the customers because there’s lesser money in the customer hands to pay EMIs and things like that.
Also with liquidity which is not abundant right now, banks also have to be careful in terms of how they build the liability balance sheet and how they fund the credit growth. So it is going to be interesting to see how it works, but good part about all this is that there is a rationalization of pricing, and the classical banking practices are coming back between NBFCs, banks, asset base, etc., because in between there is the scenario where the interest rates are so low that sometimes it was below savings rate also.
So now I think the classical banking is coming back. And hence, I think a normal credit growth is expected. I’m quite confident unless there is a significant global headwind, which is possibly because we are not completely shielded from that, we should be able to see a reasonable credit growth in our industry. And we, as a bank, we are not such a large part of the ecosystem, our growth is so much more dependent on what we execute. So our credit growth may or may not be so much dependent on what is happening in the ecosystem. Ours is more execution, product processes, building scale, building distribution. So we are more confident of the kind of credit growth, which we’ll bring in.
Pruthul Shah — Anubhuti Advisors — Analyst
Okay. Okay. Got it. And my next question is with respect to the increase in NIM. So Y-o-Y if we see that our advances has grown up by 24% and our absolute NIM is up by 17% despite NIM percentage increasing from 5.22% to 5.6% in this quarter. So can you explain why this difference is there, like advances are up by 32% and NIM is up by 17%?
Pralay Mondal — Managing Director & Chief Executive Officer
Yeah. Let me try this, but this is a more technical question. Mr. Divakara will answer better, but let me see if I know a little bit. So I think it’s also — see that our CD ratio has gone up to 87% and our CD ratio is significantly lower than this. And this is a story of the industry. Also, our investment book has rationalized a lot more. And hence, on a overall basis, the NIM looks better at this point of time. Mr. Divakara, you want to respond to this?
B K Divakara — Chief Financial Officer
Yeah. It will not grow in proportion to the growth in advances. So beyond a point, we may not be able to increase the pricing. So it has to be at a certain level, so from 5.17% to 5.60%, so it is in line with what we had expected. So I don’t think it will grow in proportion to the growth in advances.
Pralay Mondal — Managing Director & Chief Executive Officer
The mix between investments and advances are changing. That is one of the reasons and the CD ratio.
Pruthul Shah — Anubhuti Advisors — Analyst
Okay, okay. Got it. Thank you so much. That’s it on my side.
Operator
Thank you. [Operator Instructions] The next question is from the line of Anuja from Elara Capital. Please go ahead.
Anuja — Elara Capital — Analyst
Hello, sir. Congratulations on good set of numbers. I just have one question. At the moment, CD ratio is almost 87%. What is the comfortable level of this and can you give some guidance on deposit growth? I understand that we are trying to build quality deposit franchise, but is there any quantitative guidance for this?
Pralay Mondal — Managing Director & Chief Executive Officer
See, guidance is very simple that if you have to grow faster, so it’s — the answer lies in the question that if we are at a CD ratio of 87% and if you want to grow faster than the industry on the credit growth, we have no choice but to build a deposit franchise better than what we have done in the last few quarters. I mean we don’t have a choice, and hence, we are fully focused on that. And when you say deposit franchise, it’s basically growing liability because we also have to be cognizance of the LCR has to be between 100% to 120% or somewhere there.
So given that perspective, granular deposit growth, NRI focus — generally, NRI for the ecosystem has come down a little bit for various reasons, which you all know. But we expect that to reverse at some point of time, and that will give us some growth. Also, there is no substitute to execution in deposit or liability franchise. So going, adding more customers, building task franchise, also we are looking at government businesses and things like that. Of course, in the LCR, we will continue to focus. So from that perspective, I think it’s all execution. On the comfort level on, we don’t have a choice. We have to build the liability, okay?
Now coming to comfort, I think overall the system CD ratio must have gone up significantly this quarter. I mean it’s automatic because if there’s a credit growth of 18%, 19% and if liquidity is where it is today, CD ratio has to be much higher, especially on the private sector banks, who are growing faster. So given that perspective, 87% is reasonably comfortable, in my view, on a relative basis. But anything above 90%, we need to be monitoring it a little more carefully. And obviously, we don’t want to — we’re not a NBFC, we are a bank, so we will not depend on CDs and things like that to build, but if we have to dip into that once in a while, on some tactical stuff, we’ll do it, but that’s not the strategy. We’ll build up a very clear granular liability franchise.
And we have people with us who have built granular liability franchise in one of the largest banks who knows how to build it, our head of retail. He was actually in the liability sales franchise in HDFC Bank many years back. So it’s — and we have seen that time also, it’s all about execution. So let me put it this way. We are clearly focused on building granular liability franchise because doing assets is easy and the core strength of a bank is the liability franchise, we all understand that, so we’ll build that.
Anuja — Elara Capital — Analyst
Understood, sir. Sir, and if time permits, I would like to add one more question. At the moment, NIMs are 5.6%, which is not sustainable as you mentioned in your commentary. We used to give guidance of 4.5% to 5% for NIM. Do we stick to same guidance or are we revising to upwards?
Pralay Mondal — Managing Director & Chief Executive Officer
It’s a difficult question, I’ll tell you why. I mean, just because I’ve given a guidance and if I have ability to do more, why should I say, no, okay? But to be very frank, when I said that 4.5% to 5%, I was talking about our slightly longer-term because if you have to have a sustainable growth on the mix, which I said by 2030 or by 2027 while we’ll be there, automatically the NIMs will come down.
Typically, the way it works, you would know that, even if NIMs comes down, your ROA won’t go down because ROA will be based on customer level profitability. And if you do not — for example, if you don’t have a home loans with a customer, if you don’t have a payment products with a customer, your liability franchise will also not go up. It’s like it’s a cycle, right? You have to locate the money through its liability and assets and EMIs and payments and ecosystem, etc.
So to that extent, we have to start looking at, once we have all the products and processes and it’s still three years, four years away and that was the guidance that 4.5% to 5% is that time, then we will get customer-level profitability and our ROA through — by that time, we should be having our noninterest income to total income close to 13% and I mean somewhere between 10% to 15% and our customer level profitability has to significantly go up. Cross-sell ratio has to significantly go up at a customer level, which today is very low.
So NIM is not the only way to create ROA, but when you are running a niche franchise, that’s the only way. But long run, when we have a 4.5% to 5%, there will be many other income streams that will come along including transaction banking, wholesale and so on and so forth. In the medium term, I think if you look at the next 12 months or so, I think we should be able to maintain between 5% to 5.5%, but I don’t think that NIM is the only judgment of a franchise. Sometimes 4.5% to 5% is better than 5% to 5.5% depending on how we look at the overall franchise.
Anuja — Elara Capital — Analyst
Understood. That’s it from my side. Thank you, sir, and all the best.
Pralay Mondal — Managing Director & Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Pruthul Shah from Anubhuti Advisors. Please go ahead.
Pruthul Shah — Anubhuti Advisors — Analyst
Yeah. Sir, in last call, you guided that for the full year, we are going to open 100 more branches and if we see in current six months there are five branches, which have been opened. So is that guidance still remaining the same for the full year?
Pralay Mondal — Managing Director & Chief Executive Officer
Yeah, yeah. We should be able to — give and take, five, 10 here and there because of some last-minute acquisition issues, etc., we should be able to open around 100 branches this year as well. It typically happens in the last two quarters and more it happens in the last quarter. That’s the way it works for us. So we will be able to do somewhere close to 90 to 100 branches this year also. We have to give you more granularity on that, we have already identified 80 locations where work is on, okay?
Pruthul Shah — Anubhuti Advisors — Analyst
Okay, okay. Thank you so much. That is helpful.
Pralay Mondal — Managing Director & Chief Executive Officer
Thank you.
Operator
Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for the closing comments. Over to you, sir.
Pralay Mondal — Managing Director & Chief Executive Officer
Thank you. Thank you, Manish and Axis Capital for organizing this call. And again, I wish to thank everybody for joining us on this Q2 FY ’23 call of CSB, and wish everybody a very, very happy Diwali, a long weekend ahead. And I’m sure a lot of you are taking Tuesday also as a holiday. So have a wonderful five-day long weekend. Thank you very much, and have a very, very good festive season.
B K Divakara — Chief Financial Officer
Thank you.
Operator
[Operator Closing Remarks]
Pralay Mondal — Managing Director & Chief Executive Officer
Thank you very much.