TMB Concall and Result Highlights (Feb 2025)
Financial Performance
Operating Profit Growth
TMB Concall Q3: The operating profit of Tamilnad Mercantile Bank Ltd (TMB) rose from INR 370 crores to INR 408 crores, reflecting a 10% year-on-year growth. This steady increase showcases the bank’s improved efficiency and financial health.
Net Profit Achievement
The net profit grew by 6% year-on-year, crossing the INR 300-crore mark for the second time in the bank’s history. It reached INR 300.24 crores, which is a significant milestone.
Non-Interest Income
Non-interest income surged from INR 158 crores to INR 189 crores, marking a growth of nearly 20%. This increase indicates the bank’s successful efforts in diversifying its income streams.
Improved Asset Quality
- Gross NPA: Decreased to 1.32% from 1.69% a year ago, indicating a positive shift of 37 basis points.
- Net NPA: Dropped from 0.98% to 0.41%, reflecting an improvement of 57 basis points.
- Provision Coverage Ratio (PCR): Increased to 69.07%, with the total PCR (including return of accounts) reaching 93.21%.
Capital Adequacy and Share Value
- Capital Adequacy Ratio: Improved by 340 basis points year-on-year to 29.35%.
Business Growth
The total business of the bank experienced over 10% year-on-year growth, the highest recorded in the past 14 quarters.
Asset Quality Improvements
SMA to Gross Advances
The total SMA (Special Mention Account) ratio to gross advances reduced by 157 basis points, standing at 3.77% year-on-year.
Slippage Ratio
The slippage ratio dropped to 13 basis points, with total slippages for the quarter amounting to INR 54 crores.
SMA Breakdown
- SMA-0: 1.36%
- SMA-1: 1.18%
- SMA-2: 1.23%
Deposits and Advances
Deposits Growth
TMB witnessed a year-on-year deposits growth of 7.68%, doubling compared to the previous year.
Advances Growth
The bank’s advances grew by 13.71% year-on-year, driven by a strategic focus on retail and MSME segments.
CASA Ratio
The CASA (Current Account Savings Account) ratio remained flat year-on-year. However, management has initiated steps to improve it.
Strategic Initiatives
Global NRI Center
A dedicated NRI center was launched to increase the share of NRI deposits from 4% to 10% over the next 2 to 2.5 years.
Credit Management Center
This new center aims to enhance credit portfolio management and streamline operations.
Transaction Business Group
A specialized group has been created to strengthen the current account base, focusing on government and institutional accounts.
Management Insights
NIM and ROA Guidance
- NIM (Net Interest Margin): Management aims to maintain a 4% NIM but anticipates a slight moderation to 3.75%-3.80% due to increased leverage and higher funding costs.
- ROA (Return on Assets): Expected to moderate to around 1.75% as the bank expands its business.
Focus on Secured Lending
Unsecured lending remains minimal at below 0.5% to avoid exposure to market delinquencies.
Challenges and Outlook
CASA Challenges
The flat CASA ratio has prompted the management to introduce new initiatives and appoint relationship managers to address this issue.
Economic Conditions
Despite external economic pressures, the management remains optimistic about the bank’s growth strategies.
Investor Confidence
Efforts are being made to showcase consistent growth and rebuild investor trust, supported by positive business growth trends.
Technology and Automation
Investment in Automation
Significant investments have been made in technology to improve operational efficiency, including vendor management and credit process automation.
Branch Expansion
The bank opened five new branches and plans to open more to enhance its geographical presence and market reach.
Overall Sentiment
The management expressed confidence in the bank’s transformation journey. The focus remains on improving profitability, enhancing operational efficiency, and managing risks effectively.
FAQs
What is the key highlight of TMB’s recent financial performance?
The bank’s operating profit grew by 10% year-on-year, reaching INR 408 crores, while the net profit crossed INR 300 crores for the second time.
How has TMB improved its asset quality?
The Gross NPA reduced to 1.32%, and the Net NPA declined to 0.41%. Additionally, the Provision Coverage Ratio increased to 69.07%.
What steps is TMB taking to enhance its CASA ratio?
The management is implementing initiatives and appointing relationship managers to improve CASA numbers.
What is TMB’s strategy for NRI deposits?
The newly launched Global NRI Center aims to increase the NRI deposit share from 4% to 10% over the next 2 to 2.5 years.
How is TMB leveraging technology?
The bank is investing in automation to enhance efficiency in vendor management and credit processes.
By focusing on strategic initiatives, maintaining strong financial performance, and addressing challenges proactively, TMB aims to achieve sustained growth and operational excellence.
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