Tamilnad Mercantile Bank Limited

Tamilnad Mercantile Bank reported a robust Q3 FY26, with total business growing 14.28%, surpassing its own guidance of 12.40%. Net Profit reached a record ₹341.50 crores, marking a 13.74% year-on-year increase. This strong performance translated into an improved Return on Assets (ROA) of 1.97% and Return on Equity (ROE) of 14.22%, both higher than previous periods.

The bank demonstrated excellent asset quality management, with Gross Non-Performing Assets (GNPA) declining to 0.91% (down 41 basis points year-on-year) and Net Non-Performing Assets (NNPA) at a low 0.20%. The Provision Coverage Ratio (PCR) stood at 78.35% on-book and 96.08% including technical write-offs. Slippages were contained at 5 basis points, and the credit cost was negative 10 basis points, reflecting strong recovery efforts.

The bank's deposit base grew 12.53%, with a significant turnaround in its CASA (Current Account Savings Account) share, which improved to 27.95%. This represents a 14.94% year-on-year growth in CASA and an increase of 155 basis points from its lowest point in FY25. The cost of deposits also saw a reduction of 7 basis points to 5.83%, contributing to a healthy Net Interest Margin (NIM) of 4.04% for the quarter.

Advances grew 16.30% year-on-year, with a quarter-on-quarter growth of 8.17%. The growth is primarily driven by secured exposures, with unsecured advances constituting only 11% of the total. The MSME segment, a key focus area, showed a 6.74% growth for the quarter, recovering from negative growth in Q1. The bank is also strategically expanding its gold loan portfolio, which currently accounts for 45% of its total advances, while also focusing on retail segments like housing and car loans.

TMB is actively pursuing digital transformation, with 96.96% of transactions now handled digitally. Significant IT investments of ₹250 crores have been allocated, with about half already completed. A revamped internet banking platform is expected to launch by mid-February 2026. The bank is also expanding its physical presence, having opened 36 new branches in the first 10 months of FY26, with 13 of these outside Tamil Nadu, aiming for 50+ new branches by year-end.

Management expressed confidence in achieving over 15% total business growth and 16-17% advances growth for FY26, with Q4 results expected to surpass Q3. For FY27, the bank targets maintaining asset quality below 1% and credit costs below 15 basis points. Strategic HR initiatives, including hiring 1043 new personnel and 20 high-performing branch heads for new branches outside Tamil Nadu, are aimed at supporting future growth and strengthening the bank's presence in new geographies like Kerala, Karnataka, Maharashtra, Gujarat, and Tier 2 Telugu states.

The bank is in the early stages of its co-lending strategy, currently focusing on getting the necessary platform in place, which is expected to be ready this quarter. While one tie-up with an NBFC has been established, significant expansion in co-lending is anticipated only after the platform is fully operational, with growth expected in the next year.

The Credit Management Centers (CMCs) are now fully operational and handle all advances except jewel loans and loans against deposits. This centralized approach, which will be fully implemented by FY27, aims to standardize appraisal processes, ensure high quality, and manage stress elements effectively, with Relationship Managers on the ground generating leads and appraisals done at the CMC level.