Tamilnad Mercantile Bank to soon detail branch expansion strategy to board, MD says

TMB's shares got listed on the Indian stock exchanges on September 15, 2022.

Tamilnad Mercantile Bank (TMB) will soon place its expansion plan before the board for approval after the regulator lifted restrictions on the lender for opening new branches, S Krishnan, managing director and chief executive officer of the Thoothukudi-headquartered lender said.

“Very shortly, I will be taking a proposal to my board detailing the phases, the numbers and the period over which I will be expanding (branches),” Krishnan told Moneycontrol in an exclusive interview. “The board will be assessing this. Then I will come back to you with the exact number and also the locations once it is approved by the board.”

Currently, TMB has a pan-India presence with 509 branches and 12 regional offices across 16 states and four Union territories.

The bank will expand branches “over a period of time” in such a way that there is a quick break-even and does not affect its bottom line, added Krishnan.

On October 21, TMB announced that the Reserve Bank of India (RBI) has lifted the restriction on opening new branches with immediate effect. The curbs were imposed for failing to raise subscribed capital to at least half of the authorised share capital line with requirements.

In an interview with Moneycontrol in September this year, the bank's former MD and CEO K.V. Rama Moorthy had said that the RBI advised the bank to get listed and then approach it for opening new branches.

The bank's shares got listed on the Indian stock exchanges on September 15, 2022.

TMB’s total business for the fiscal half year ended September stood at Rs 78,013 crore with a growth rate of 7.43 percent. Its deposit and advance portfolio was at Rs 43,137 crore and Rs 34,877 crore, respectively as of September-end.

Krishnan acknowledged that the bank’s term deposits have fallen marginally in the first half but CASA – current account savings account – deposits witnessed a year-on-year growth rate of 15 percent. Now that the RBI has lifted restrictions on branch addition, the bank will be able to expand its footprint, which will also help in mobilising business further, Krishnan said, adding, TMB is also working on providing digital services to customers, which will, in turn, help in improving business.

The total deposit base for this financial year is expected to be around Rs 48,500 crore while advances will be around Rs 34,500 crore, taking the total business to Rs 83,000 crore, he said.

When asked about the bank’s credit growth trajectory, Krishnan said that 87 percent of the bank’s advances comprise loans to retail, agriculture and medium and small enterprises (RAM).

Going forward, the bank will continue to focus on the RAM segment and also on corporate advances on a case-to-case basis, he added.

TMB mobilised Rs 831.6 crore through its initial public offering, which will be utilised for augmenting tier-I capital to meet future requirements.

TMB’s Capital to Risk (Weighted) Assets Ratio -- or the ratio of capital to its risk-weighted assets and current liabilities -- was at 24.58 percent for the fiscal half year ended September.

Krishnan said the bank is very comfortable with its capital position post the IPO. TMB is not planning to raise any further capital in the near future, he said.

TMB, on October 27, reported a 37 percent year-on-year rise in net profit at Rs 262 crore for the July-September quarter amid an increase in the top line and a drop in bad loans. The bank had earned a net profit of Rs 191 crore for the year-ago period. Total income during the reporting quarter rose to Rs 1,141 crore from Rs 1,101 crore a year ago.

TMB’s gross non-performing assets (NPA) as a percentage of total advances stood at 1.70 percent while net NPA was at 0.86 percent as of September-end. The provision coverage ratio stood at 88.58 percent.

Krishnan said the bank is “very much comfortable” on the provisioning front and has adequate buffers for NPAs. TMB’s restructured book currently stands at Rs 914 crore and is behaving well, he said. Going forward, the bank aims to maintain its gross and net NPA ratios at current levels, the MD said.