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    Tamilnad Mercantile Bank Q1 FY27 earnings call

    TMB
    Financial Services·27 Jul 2026
    Management Summary

    Tamilnad Mercantile Bank Limited delivered a robust Q1 FY27, achieving its highest-ever net profit of INR412 crores, a 34.97% increase year-on-year. Total business grew by 23% to INR1,21,715 crores, driven by strong advances growth of 27.01% and deposit growth of 19.71%. Asset quality remained strong with GNPA at 0.69% and NNPA at 0.17%, supported by a high PCR of 75.36% and proactive provisioning for ECL. The bank also maintained a high capital adequacy of 32.33% and expanded its NIM to 4.29%, while managing its cost-to-income ratio below 40%.

    Highlights

    6

    • Total business increased 23% to INR1,21,715 crores, highest growth in 14 years.

    • Net profit was an all-time high of INR412 crores, up 34.97% year-on-year.

    • Return on Assets (ROA) improved to 2.14% for the quarter, up 32 basis points year-on-year.

    • Capital Adequacy Ratio (CAR) stood at 32.33%, one of the highest in the industry.

    • Gross NPA declined to 0.69%, down 53 basis points year-on-year, and Net NPA to 0.17%, down 16 basis points year-on-year.

    • Provision Coverage Ratio (PCR) on book was 75.36%, with 100% provision for stressed non-fund based facilities (INR26 crores).

    Concerns

    2

    • CASA ratio declined by 2.95% quarter-on-quarter (INR500 crores) due to a strategic focus on term deposits, though management expects it to pick up.

    • SMA 0, 1, 2 showed an uptick quarter-on-quarter, primarily due to INR100-150 crores in the gold loan portfolio, but management states it is under control and being resolved.

    Key financials

    Single quarter

    39 metrics
    1. 01Total Business₹1.22L Cr+23%YoY
    2. 02Deposits₹64,409 Cr+19.7%YoY
    3. 03Advances Growth—+27.0%YoY
    4. 04Net Interest Income—+32.0%YoY
    5. 05Operating Profit₹611 Cr+48.2%YoY

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Liquidity

    Liquidity disclosed

    LCR at 140.74% and NSFR at 150.74%, both well above regulatory minimums. Tier 1 capital at 31.30%.

    Guidance & targets

    16
    CategoryTargetPriority
    Volume
    CASA Growth
    17-18%
    		High
    Volume
    Deposit Growth
    18%
    		High
    Volume
    Advances Growth
    21-22%
    		High
    Volume
    Total Business Growth
    20%
    		High
    Volume
    MSME Growth
    >20%
    		High
    Volume
    Housing Loan Growth
    8-10%
    		Medium
    Volume
    Vehicle Loan Growth
    ~25%
    		High
    Margin
    NIM
    >4%
    		High
    Profitability
    ROA
    >2%
    		High
    Profitability
    ROE
    15%
    		High
    Asset Quality
    GNPA
    <1%
    		High
    Asset Quality
    ECL Provisioning
    Fully provided
    		High
    Portfolio Mix
    Gold Loan Portfolio Share
    <50%
    		Medium
    Capex
    IT Spend
    INR280 crores
    		High
    Capex
    Cybersecurity Spend (as % of IT Spend)
    10%
    		High
    Efficiency
    Cost-to-Income Ratio
    44-45%
    		High

    What to watch in Q2 FY27

    5

    CASA Ratio Improvement

    next quarter
    Current26.16% (down 2.95% QoQ)
    TargetImprovement, picking up

    Why it matters

    Indicates the strength of the bank's deposit franchise and its ability to manage the cost of funds.

    But we are focusing back on it, back on the CASA... you will see the CASA pick up going forward⏳.

    Risks & concerns

    4
    RiskSeverity

    CASA Ratio Decline

    CASA ratio declined by 2.95% QoQ (INR500 crores) due to a strategic focus on term deposits, impacting cost of funds. — Analyst acknowledged

    medium

    Uptick in SMA Accounts

    SMA 0, 1, 2 showed an uptick QoQ, primarily due to INR100-150 crores in gold loan portfolio, but management states corrective actions are in place and it's under control. — Analyst acknowledged

    low

    Gold Price Stabilization Impact on Gold Loan Growth

    Stabilization of gold prices around $4,000/ounce might moderate the high growth rate seen in gold loans, necessitating a shift to tonnage-based growth and customer acquisition. — Management acknowledged

    low

    Show Cause Notice 1 Appeal

    While the Appellate Tribunal reduced the penalty and dismissed confiscation claims, the ED can still appeal, and the bank is evaluating further legal actions. — Management acknowledged

    medium

    Q&A highlights

    8

    “The guidance, if you recall, we had said that CASA growth will be 17% to 18%... deposit growth, we said we will be 16%. I think we are increasing it by another 2%... Advances growth, we said 20%. I think we would be upgrading that again by another 2%, 21% to 22%... Net interest margin, 3.90%, I think we should be very well past the 4% mark for the year. ROA, 1.9% is what we guided. I think it is going to be, again, well over 2%. ROE, 15% is now our revised guidance.”

    Management provided comprehensive and upwardly revised guidance for key financial metrics for FY27, indicating strong confidence in future performance.

    asked by Digant Haria

    2 min read6 chapters

    Detailed Narrative

    01

    Record Profitability and Robust Business Growth

    Tamilnad Mercantile Bank Limited reported its highest-ever net profit of INR412 crores in Q1 FY27, marking a significant 34.97% year-on-year increase. This strong performance was underpinned by a 23% growth in total business, reaching INR1,21,715 crores. Operating profit also saw a substantial rise of 48.22% to INR611 crores, contributing to an improved Return on Assets (ROA) of 2.14% and Return on Equity (ROE) of 15.93% for the quarter.

    02

    Strong Asset Quality and Proactive Provisioning

    The bank maintained robust asset quality, with Gross NPA declining to 0.69% (down 53 basis points YoY) and Net NPA at 0.17% (down 16 basis points YoY). The Provision Coverage Ratio (on book) stood at a healthy 75.36%, and slippages were contained at 8 basis points. TMB proactively provided 100% (INR26 crores) for stressed non-fund based facilities for the first time and has set aside a total of INR276 crores for the upcoming ECL regime, including a INR250 crore COVID contingency provision.

    03

    NIM Expansion and Enhanced Cost Efficiency

    Net Interest Margin (NIM) expanded by 45 basis points year-on-year to 4.29% for the quarter, driven by a 32.01% increase in Net Interest Income. The cost of deposits moderated by 3 basis points to 5.68%, while advances yield improved by 17 basis points to 10.10%. The bank also demonstrated strong cost efficiency, with its cost-to-income ratio falling below 40% to 39.10%, a figure management aims to revise downwards from its previous guidance of 46-47%.

    04

    Strategic Deposit Mobilization and CASA Dynamics

    Deposit growth was strong at 19.71% year-on-year, with term deposits growing 20.73% quarter-on-quarter. However, the CASA ratio experienced a quarter-on-quarter decline of 2.95% (representing INR500 crores) as the bank strategically focused on securing its resource base through term deposits. Management indicated a renewed focus on improving CASA through branch expansion, with 6 new branches opened in Q1 and 60 planned for FY27, and by strengthening its transaction business group.

    05

    Diversified Advances Portfolio and Gold Loan Strategy

    While gold loans were a significant contributor to advances growth in Q1, management anticipates their growth might moderate as gold prices stabilize around $4,000 per ounce. The bank is shifting its gold loan strategy towards tonnage-based growth and customer acquisition. Concurrently, MSME advances grew over 20% year-on-year, and non-gold retail segments like vehicle loans (25.7% growth) and home loans (targeting 8-10% growth) are expected to drive future growth, ensuring a diversified advances portfolio.

    06

    Regulatory Update and IT Investment

    The bank received a favorable outcome regarding a show cause notice, with a penalty reduced from INR17 crores to INR3.4 crores, and the Enforcement Directorate's claim for confiscation of shares dismissed. TMB plans to invest INR280 crores in IT for FY27, with allocations for infrastructure (21%), software acquisition (20-35%), and a significant focus on cybersecurity (10% of IT spend), aiming to ramp up investments in this critical area.

    This is an AI-generated summary of a publicly available earnings call transcript.