TMB - Tamilnad Mercantile Bank Limited Share Price

In the Q4 FY2024-25 earnings conference call, Tamilnad Mercantile Bank's management provided a positive outlook and highlighted several key points regarding their financial performance and strategic initiatives.

For FY2025, the bank reported a record net profit of INR 1,183 crores, representing a 10.35% growth year-on-year, and an operating profit of INR 1,746 crores, an 18% rise from the previous year. The total income increased by 12% to INR 6,142 crores. The management emphasized a significant improvement in asset quality, noting a Gross Non-Performing Assets (GNPA) ratio of 1.25%, the lowest in ten years, and a Net NPA ratio of 0.36%.

Looking forward, the management forecasted a combined business growth of 13% to 14% for FY2026, with deposits anticipated to grow by 11% to 12% and advances expected to rise by 15% to 18%. They expressed confidence in the current initiatives, particularly in the establishment of a Transaction Banking Group and a Global NRI Center aimed at boosting CASA deposits and enhancing service offerings.

The management also projected a Net Interest Margin (NIM) of 3.80% to 3.90%, indicating a slight moderation from previous levels due to changing market conditions. They aim to maintain a cost-to-income ratio below 50%, with the current ratio reported at 44.6%. Moreover, the Capital Adequacy Ratio (CAR) stands at a robust 32.71%.

The management acknowledged that FY2026 may bring challenges from various strategic changes, but they expect substantial benefits in the second half of the fiscal year. They anticipate FY2027 to be a significant year for the bank as these initiatives take full effect. Overall, the outlook remains optimistic, centered on operational improvements and market alignment.

Below are the major questions and their respective answers from the Q&A section of the earnings call transcript:

Question 1: "What is the advances growth forecast for this year, as well as deposit growth forecast for the coming year?"

In FY '26, I am looking at a combined growth of 13% to 14%. The first couple of quarters may face challenges as we adjust to changes, but by the second half, we expect to see significant benefits from our initiatives. For deposits, we anticipate an 11% to 12% growth, while advances should grow between 15% to 18%.

Question 2: "What kind of guidance is there for NIMs?"

We expect NIMs to moderate slightly due to rate cuts. With our ongoing CASA growth initiatives, I project NIM to stabilize between 3.80% and 3.90%. We're working to protect it as we implement our transaction business group to enhance CASA.

Question 3: "Is the cost-to-income ratio expected to normalize further?"

The cost-to-income ratio is currently at 44% and may increase slightly but will remain below 50%. Efficient management and upcoming initiatives should help maintain this level.

Question 4: "What is the outlook on ROE for FY26 and FY27?"

For FY26, I anticipate ROE around 14%, slightly better than what we delivered in FY25. Achieving 18% ROE will likely occur in FY27 as growth initiatives fully materialize.

Question 5: "What percentage of our business comes through digital channels?"

Currently, digital channels contribute only 2% to 3% of our total business. Going forward, we are revamping our onboarding processes and implementing business rule engines to increase this percentage significantly.

Question 6: "What are the plans for expanding branches outside Tamil Nadu?"

In FY26, we plan to open at least 50 branches, with around half located outside Tamil Nadu. This will help reduce our reliance on the state, aiming to bring down our presence from 75% to 60% in Tamil Nadu in three years.

These answers provide insights into growth forecasts, strategy, and operational metrics relevant to the bank's future performance.