TMB - Tamilnad Mercantile Bank Limited Share Price

Management's outlook for Tamilnad Mercantile Bank for FY27 reflects confidence in sustaining growth amid challenging macroeconomic conditions. Key forward-looking points highlighted include:

1. Growth Projections: Management aims for deposit growth of at least 16%, similar to the 20% advance growth achieved in FY26. They suggested the potential for even higher loan growth, particularly in the MSME segment.

2. Previous Guidance vs. Achievement: For FY26, management had projected CASA growth of 15%; they achieved 22.35%. Deposit growth was guided at 13-13.5%, but ended at 14.94%. Advance growth was expected in the range of 16-17%, while actual growth reached 20.32%.

3. Financial Metrics:

   • Net Interest Income: Increased by 24.04% to Rs.704.45 crores.
   • Net Profit: Rose 28.01% year-on-year, totaling Rs.373.65 crores.
   • Return on Assets (ROA): Exceeded guidance of 1.85%, reaching 2.05%.
   • Return on Equity (ROE): Surpassed the 14% mark, standing at 15.03%.
   • Net Interest Margin (NIM): Achieved 4.18%, benefiting from growing advances and repriced deposits.

4. Asset Quality: GNPA at 0.73% and net NPA at 0.18% mark significant improvement, with an on-book Provision Coverage Ratio (PCR) at 74.89%. Management is focused on maintaining asset quality with proactive measures in place.

5. Branch Expansion: Although management aimed to open 50 branches in FY26 and achieved 44, they have plans for 60 new branches in FY27, indicating strong market penetration strategies.

6. Digital Transformation: Continues toward completion, enhancing operational efficiency and customer service.

In summary, management is optimistic about FY27, with significant initiatives in place to maintain robust growth, profitability, and asset quality. They expect the bank to operate with greater confidence due to successful reforms and growth strategies.

Questions and Answers from the Earnings Conference Call transcript:

1. Question: "Would you like to guide anything in terms of the loan book growth for this year? Because I think the macros have turned a little bit sour because of the war in the Middle East." Answer: "Despite the West Asia crisis, we aim for a deposit growth of at least 16% for FY27, matching last year's excellent growth of 20%. We are optimistic about reaching the same level for advances."

2. Question: "What will be the Dhurandhar for FY27? Will it again be gold loans or do you see some other segments also picking?" Answer: "MSME will be our focus, as it delivered a notable 14.88% growth this year. Our strategy will evolve to bolster MSME, developing systems to enhance this growth as gold loan growth moderates."

3. Question: "In the last quarter, in our retail, we had INR6,700 crores of gold loans. What would that number be for this quarter?" Answer: "Our gold loan portfolio stands at INR6,500 crores this quarter, reflecting the impact of regulatory changes and the shift in focus towards agricultural gold loans."

4. Question: "What is the reason for the increase in slippages in the agri portfolio?" Answer: "There was a single account contributing to Delhi's slippage of INR19 crores, but it's a standard asset with expected recovery in the next quarter, showing proactive management of our portfolio."

5. Question: "How many branches do you plan to open in FY27?" Answer: "We are looking to open 60 branches in FY27, ensuring stronger market penetration and business development."

6. Question: "What do you see as the cost-to-income trending towards in the next 2-3 years?" Answer: "Despite investments in IT and branch refurbishments, we are committed to maintaining a cost-to-income ratio below 50%, ideally around 46-47%."

7. Question: "What proportion of your deposits are yet to reprice?" Answer: "By the first quarter, about 8% of our original high-cost deposits will be fully repriced, although we anticipate challenges in achieving significant price benefits."

8. Question: "What would you, what should we assume as the ROA target for FY27?" Answer: "We are aiming for an overall ROA of 1.9% to 2% for FY27, although profiting from MSME growth may temporarily moderate this."

9. Question: "What is your target CASA ratio?" Answer: "While I can't share specific internal targets, we've seen our CASA ratio rise to 28.14% and expect continued upward movement."

10. Question: "What can we assume for the next quarter's operating profit?"

Answer: "We are confident in defending an operating profit level around INR500 crores for Q1 FY27, despite anticipated lower NIMs and ROAs."

These questions and answers summarize the key insights discussed during the earnings conference call, focusing on growth strategies, financial performance, and managerial outlook for the upcoming fiscal year.