TAMILNAD MERCANTILE BANK (NSE: TMB) Q3 2025 Earnings Call dated Jan. 29, 2025
Corporate Participants:
Salee S Nair — Managing Director & Chief Executive Officer
Vincent Menachery Devassy — Executive Director
Analysts:
Sarvesh Gupta — Analyst
Sana Mehta — Analyst
Saket Kapoor — Analyst
Anant Mundra — Analyst
Presentation:
Operator
Ladies and gentlemen, the conference of Mercantile Bank will begin shortly. Please stay connected and apologies for the delay. Ladies and gentlemen, the conference of Damil Macantal Bank will begin shortly. Please stay connected and do apologize for the delay. Thank you ladies and gentlemen, good day, and welcome to the Q3 and 9M FY ’25 Conference Call hosted by Thamil Nar Mercantile Bank. This conference call may contain certain forward-looking statements based on the beliefs, opinions and expectations as on the date of this call. These statements are not the guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. As a reminder, all participant lines will remain in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touchstone telephone. Please note that this conference is being recorded. Today on the call, we have with us the following management representatives, Mr Sally F Nair, Managing Director; Mr Vincent Mina, Executive Director; and Mr P.A. Krishnan, Chief Financial Officer. I now hand the conference over to Mr Sally, Managing Director. Thank you and over to you, sir.
Salee S Nair — Managing Director & Chief Executive Officer
Thank you. Thank you for introducing the team here. In addition to the three that you mentioned, I also have Mr Ashok Kumar, who is who is looking at our resource mobilization as well as Ganesh, who is our Head of our. At the outset, let me apologize for being a little late. I know the presentation has been loaded a little — perhaps not as early as you would have probably wanted. We did have a tight schedule at the Board and this the Board meeting did go on for some time. But anyway, coming back to the quarter three performance of FY ’25 of Tamil Nado Bank if I look at the operating profit that has improved from INR370 crores to INR408 crores. That’s — that’s a growth of 10% year-on-year. The numbers I’m quoting are all year-on-year. The net profit is again crossed INR300 crores for the second time in the bank’s history. It is up 6% year-on-year from INR284 a year back to INR300.24 crores. Non-interest income has delivered a solution performance with INR189 crores, up from INR158 crores, which is an increase of almost 20%. Gross NPA has decreased to 1.32%. A year back, it was at 1.69%, that’s an improvement of 37 basis-points. Net NPA likewise has also seen a sharp decline to 0.41% 41 basis from 0.98 basis to 0.98%, an improvement of 57 basis. PCR on-book PCR has increased to 69.07%. In fact, I did mention that we have — we will try and achieve the 70% mark by mark. We are well on our way to that. And overall, the PCR is including the written-off accounts is at 93.21%. The total SMA to gross advances has also reduced. It has come down 157 basis-points since the last year and it currently stands at 3.77%. The capital adequacy ratio has increased to 29.35%, 29.35%, a jump of 340 basis-points from last year. The book-value of the share has likewise increased from INR484.25 crores to 550.38 — sorry, INR485.25 rupees to INR550.38 rupees. The total business growth for the — for the 3rd-quarter year-on-year basis crossed 10%. This is in fact is the highest business growth that we have achieved in the last 14 quarters and that is if you look at the quarter-on-quarter growth that has been been achieved and also the — the growth — the business growth that we saw in FY ’24 and I don’t know-how many of you have access already to the presentation. We are seeing a graph trending up. For example, in FY ’24, the total business growth that the bank achieved was 4.8% year-on and now it has inched up in-quarter one to 6.8, quarter two to 7.8% and in-quarter three, it has crossed 10.4%. So that’s the focus that we are bringing into the business is beginning to pay-off. It’s early days, but we noticed that clearly the green shoots are there. Likewise on the deposit there, an area of weakness for us has also seen a similar growth. In fact, from FY ’24 where the growth was very, very muted at 3.7%, it has doubled to 7.7% in-quarter three FY ’25. And advances, of course, I have delivered a year-on-year growth of 13.7%. So that is something that in both the deposit and advances. If you recall my last conversation with the investor — the investor community, I did mention that we will cross 7.5% in deposit. We have done that. I mentioned that we will cross 13% in advances. We have again done that. On the shareholder values, if I just take the net-worth. I did mention that our capital adequacy stands at 29.35% and that’s riding on a net-worth of INR8,715 crores, INR8,715 crores. Today, the leverage of the bank is just 6.5%. That’s a fairly, fairly acceptable leverage. The book-value of the share stands at INR550.38 rupees, it is it has jumped from 5.2.37 to 50.38 and the earning per share that the — that the bank delivered for the quarter is INR18.96 now if I look at some of the key ratios, the net profit, as I mentioned has crossed INR300 crores, again for the second time. If you recall, it was at INR303 crores for the quarter — quarter two. And this quarter also, we managed through efforts to take it beyond INR300 crore, it’s at INR300.24 crores. The operating profit is at INR408 crores. The net interest income is at INR573 crores, up from INR537 crores in a year back. The gross NPA has been consistently moving — trending down the last four quarters and stands at 1.32%. I just mentioned that the net NPA at 4.41% has also seen a trend down. If you have access to the presentation revaluating the person, you would notice this. PCR as I just mentioned, is that 69% is around book PCR. So the return on of asset is at 1.89%. So that it’s almost flat, I would say, but maybe a little lower than what we achieved last year at 1.93 and the return-on-equity is at 14.44%, slightly down again from 15.11% achieved last year. The credit cost is at almost at 0.08%, that is just eight basis pointing to the kind of quality that we are delivering on the courage. The cost of funds has moved up from 5.92% in the previous quarter and 5.90% in the previous year to 5.99%. And the cost-to-income ratio stands at 46%, 46.31%. And when I talk of cost of funds, that also includes the cost of deposits, which stands at 5.97%. Indone advances is at 10.17% and that if you look at the presentation has gone — come down from 10.47% but if you recall that there was a technically written-off account recovery — interest recovery which had sort of increase the net interest income and consequently yield on the advances. Net of the — this interest recovery, we have mentioned also in the presentation, excluding the recovery from there — from the technical account, the yield on advances has moved up quarter-on-quarter. In fact, it has moved on year-on-year as well as quarter-on-quarter. Yes, last year it was 10.13%. It has moved up to 10.16% this quarter, quarter three of FY ’25 as well as it was from — yeah, from the previous quarter at 10.11% also, it has moved up. On the NIM, on the NIM, the — I did mention that we will try and defend the 4% NIM. It is — it is actually at 4% and this quarter we did not have the advantage of any — any technical account, the interest sort of helping us in the net interest income. So net of that, if you look at again, the net interest margin, if you remove exclude the interest on advances and the collection — sorry, and the advances the technical return of accounts, it has been almost flat or maybe a slightly — slightly up. On quarter-on-quarter, if I tell you the numbers in the quarter, first-quarter of FY ’25, it was 3.97%. Quarter two, it was 3.98% and stands today at 4%. That is on the net interest margin. NPA as I just mentioned stands at INR576.38 crores overall and is at 1.3% to 32% and that’s been trending down in the last four, five quarters. Net NPA is INR177.59 crores translate — translating into 0.41% if I look at the NPA sector-wise, yeah, all across it has come down. The gross NPA has come down. It was year-on-year it was last — last quarter, last Q3 of FY ’24, it was at INR649 crores, it come down to INR576 crores. And the reduction is reflected in all segments other than the others, where I can show you a little later that how we are — how we are enough managing the portfolio with the — with substantially reducing the portfolio in view of the stress element there. So in the slippage, we are down to 13 basis-points. Slippage ratio is 13 basis. Total slippages for the quarter was just about INR54 crores, INR6 crores of that being contributed by retail, INR13 crores by agri, MSME at 29 and others at 6%. The NPA, when I look at the NPA and in-quarter three, the NPA, which was — which was at INR584.45 crores in — as of 30th of September 2024, got reduced through cash recovery and upgrade of 61.92 and slippages of 53.85 combined aggregated the final number is a reduction from 584.45 to 576.38. SMA likewise, if I look at the SMA book, SMA has also come down. Overall SMA has come down from 4.16% to 3.77%, that is quarter-on-quarter and year-on-year from 5.34% to 3.77%. That’s a substantial decrease. And SMA zero SMA-1 and SMA-2, the contributions are more or less on equal terms. SMA zero contributed 1.36%, SMA 1.18 SMA, 2 at 1.23 aggregating to 3.77%. The contribution of retail to the SMA is 1.72, agri is 0.29, MSME is 1.58 and others are pretty much getting cleaned up. So the SMA component of this is very low, it’s 0.18%. And we have also this time added a slide on SMA plus NPA and the trend there. And this also, if you look at it, got year-on-year, SMA plus NPA together was at 7.03%, it is now down to 5.09%. So this number 5.09% is both SMA, the aggregate SMA, SMA-0, 1 and 2 as well as NPA put together. So that’s at 5.09%. On the stress assets, which includes the NPA, gross NPA and the standard restructured assets, the bank stands at 2.16%. So overall, the quality of the portfolio is being maintained and perhaps in some sense improved quite substantially in on — on the — on the deposits, when we look at the deposit, yes, there is certain concern on the CASA, the CASA number is flat year-on-year. Not only year-on-year, on quarter-on-quarter also, it is flat and I just did mention last-time that we are taking a series of initiatives to address this concern and some of them have already been launched. I’ll come to that later. So — but overall, the deposits have registered a year-on-year growth of 7.68%, which I said is double what we saw in the previous year for the bank. So like I said, the green shoots are beginning to show growth in the deposits and this is — the momentum is something we will try and try and continue going-forward. On the advances portfolio of the actions taken that the numbers are responding to the actions taken already and currently the growth year-on-year is at 13.71%. Retail segment again has not been contributing — has not contributed well in this. Again, we are taking certain measures there. Agriculture has contributed substantially. On the MSME front, I would like to state that there again, when I — we have given a split of below 50 lakhs and above 50 lakhs and at the above 50 lakhs number, if you notice that it is growing at 11.88%. We are seriously looking at the low-ticket size items where we believe it is from a — from a viability perspective, expensive to operate. So this is one area where we’ll be bringing an automated solution in the form of a business rule engine to tackle all these accounts so that we get quality and the numbers move forward. After complete due databased due-diligence is — due-diligence is done. On the RAM, RAM continues to be our broader and butter contributing 92.39%. Like I mentioned earlier, the others category where we are conscious, it has been — has provided a bit of a stress to bank. The stress is now being more or less been getting cleaned up. And yet we have not been growing this segment at all. Others is largely the pointing to the corporate sector and year-on-year, we have seen a 5.17% de-growth. But despite that, as I mentioned earlier, the gross advances have moved up 13.71% year-on year. On the financial performance on the profits itself, as I mentioned, so we entered the quarter three with a quarterly profit of INR300.24 crores. This is up to 5.63% from year-on-year. That is, it was INR384.23 crores in Q3 FY ’24, so it’s a 5.63% growth year-on-year. And when we look at the nine months number, in the nine months leading up to, 12 ’24, the net profit delivered is INR890.71 crores, which is 8.76% year-on-year. The balance sheet side, of course, has jumped from jump to INR64,716 crores currently. And also, like I mentioned, we did take a few initiatives in the last quarter and in fact, on the second of June — sorry, January this year, we have launched three initiatives. The global NRA Center has been launched aimed at, as I was mentioning, about 4%, 4.5% of current deposit — share of deposits. NRA share of deposit, we want to ramp it up over a 2, 2.5 year period to 10%, which I mentioned that last-time. We are taking — we have taken this initiative to make that happen. So this global NRA center has been launched. We have also put in-place adequate number of relation managers aimed at focus only on the NRA business. Credit management center, I also mentioned about carving out credit so that we have adequate focus and adequate skill-set to manage the portfolio, the credit portfolio that on a pilot — pilot basis, we have started on the 2nd of January this year again. And the third transaction, the third initiative that we have taken is again aimed at deposits. The global NRA center was aimed at deposit, the transaction business unit transaction business group, which is the third initiative is also aimed at improving the current account base of the banks. And this will be aimed at the current accounts, this will be aimed at the government account, this will be aimed at the institutions, the colleges, schools and the task accounts. So there is a new group within the bank that we have launched exclusively aimed at gathering low-cost funds. And as I speak today, we have 125 relationship managers have been put in-place to have this. And this number will go up. We will be ramping-up this number as the months go by. So I think these two initiatives on — on the liability side, the global NRA center and the transaction business growth and the refocusing the branches on the liability business by carving out the credit management centers, which we have now started on acquired basis, I believe would help us ramp-up the deposits going-forward, perhaps more-and-more so in the next year. So that’s from my side. Okay, I think I do have one more on the on the network. We have opened another five branches in the quarter, taking the total to 20, I did mention 40. We have also given an approval for additional 13 numbers that is a work-in progress and we are also identifying areas for another seven to be opened. So we will try and get to that 40 number. Yeah, that’s from my side. And Vincent, do you want to add something?
Vincent Menachery Devassy — Executive Director
Yeah. So the performance numbers have been articulated by the MD and CEO. A couple of things I would like to add here is that after the last quarter that is Q2, in Q3, we have significant additions to the senior management. Our VP and head credit, EVP credit has assumed charge. VP Inspection and audit IEAD HIEA has taken charge and we are in the process of finding a new CFO, hopefully the new CFO is likely to join either in the last quarter of this financial year or early in next financial year as in the first-quarter of next financial year. Thanks. The increase in the cost of deposits we were able to pass-on to the customers as reflected in increase in our — our net yield on advances, which was 10.11% without HOT — excluding HOT has more to 10.16. So there is a 5 basis-point increase in yield on advances as against a 7 basis-point increase in deposits. So whatever additional cost that we have incurred in terms of attracting deposits, we were able to pass it on to the customer. Yeah, that’s it from my side. Thank you.
Salee S Nair — Managing Director & Chief Executive Officer
We have been able to defend the NIM at 4%. And yeah. Yeah, thank you thank you.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen we will wait for a moment while the question queue assembles the first question comes from the line of Sarvesh Gupta from Maximal Capital. Please go-ahead.
Sarvesh Gupta
Good evening, sir. Sir, sir, SMA-2 has inched up a bit in this quarter. So any particular contributor to that or if you can throw some color on that?
Salee S Nair
Please repeat the question. It was very here.
Sarvesh Gupta
Sir, the SMA-2 book that has inched up a bit in this current quarter. So any particular contributor to that was some large account or something or if you can throw some color on that?
Salee S Nair
No, you are referring to NPA, you the business, what is — is we missed the first part
Sarvesh Gupta
Of SMA to
Salee S Nair
SMATO, SMA okay.
Vincent Menachery Devassy
Compared to last quarter, there is a little increase, but if you look at the trend, it is well within the trench.
Sarvesh Gupta
Okay. So were there some large accounts which I went to estimate in
Salee S Nair
Not one particular account that well spread-out account, account it has. I agree that it has moved up from 4, 90 to 5, 37. I assume you are talking about SMA two, right?
Sarvesh Gupta
Yes
Salee S Nair
It has. It has spread over a last number of accounts, not any specific account as such. I think that it’s already showing a downturn — down trend in the current month already.
Vincent Menachery Devassy
It was 561 in Q3 financial year ’24. Now that is 537 in the current Q3.
Salee S Nair
So on a — on a Y-o-Y basis, there is a decline from 561% to 57%.
Sarvesh Gupta
And your CD ratio is already around like 85%, if I can see that. So given that
Salee S Nair
86%
Sarvesh Gupta
So given that now because we have been growing our deposits at 6%, 7% and CASA challenges remain as it is, how do we see the growth because we have probably hit the upper tier of where we can. I mean, we have grown at 13%, but going-forward, the deposits have grown at a very small pace till now. So how do we see that situation?
Salee S Nair
So the first, of course, the credit CD ratio, in fact is 86% plus that is something that we access but you look at the leverage of the bank, it is just about 6.5 and the leverage is at 6.5% only because we had a comfortable capital portion. I did mention about the net-worth being 8% or 715 which also has been substantly funded. That’s one of the reasons why — or rather the reason why the leverage is at 6.5%. The other aspect of it, you did rightly hit the button saying that enough going-forward, it will be difficult unless the deposits actually move-up — move-up in tandem. And that’s exactly if you look at quarter-on-quarter, the way the deposit is behaving and the way the advances are behaving. And if I just something that you can reduce it yourself, in the quarter one, there was an advance growth of 882% against a negative growth of 327% for the deposits. Obviously, you can say that there the deposits are that on a standalone basis, that operation is not sustainable. But when we move to the second-quarter, that has improved to a to a CD ratio of 5% and I’m talking on in terms of an incremental. But you look at the quarter three, the CD ratio incremental fee ratio has come down to 106%. So you know the deposit — the ratio of deposit to advances, the CD ratio as we call is responding to our actions and it is beginning to moderate. And the moderation is very, very clearly evident in the last 3/4, leading up to the 31st of December ’24, where I said the incremental CD has come down to 106. And this — with the actions that we are taking on the deposit side should moderate further and we hope it will come down to acceptable number and a sustainable number going-forward.
Sarvesh Gupta
So then going-forward, what will be our advances growth rate that we would want to have?
Salee S Nair
Advanced growth rate for the current quarter, we will still maintain at 13% plus maybe towards the slanting towards 14%, but 13% plus. But the focus would be on the deposits where we are looking at crossing 8% and also bringing it close to, like I mentioned, the incremental CD ratio to around 100%. So the advance and deposit, we hope to move-in tantrum in a way that CD ratio remains at gets to 100 number.
Sarvesh Gupta
Understood. And this deposit, so that we have accrued, let’s say over the Nine-Month how much of that has come through bulk deposits?
Salee S Nair
Deposit in our total deposit base is about 11%. So the CASA that has remained flat. So the CASA’s contribution to the deposit mix has not been has not been there, it has just remained flat. So the growth which I mentioned earlier of 7.7% has come out-of-the term deposits. And in the overall package, overall deposit portfolio, the bulk deposit contribution is 11%.
Sarvesh Gupta
Understood, sir. Sir. And sir, finally, on the leverage point, so while you are levered less, but that is also helping you on your NIMs and ROAs. So as you grow, how do you see these NIMs and ROAs, where do you see that settling into? Because right now our credit costs are probably at the lowest point of the cycle, then your leverage is also low, which is helping your NIMs also. So I mean, how do you see these things moving in the medium-term, let’s say, next couple of years, how do you see all these metrices moving?
Salee S Nair
Next year, if I look at the NIM, I don’t think we will be able to do a 4% NIM. I think that will be a challenge. There will be moderation of NIM going-forward, but this will be in the three — of course, we also anticipate a rate cut hopefully, I don’t know when the NPC meets, right? So could be — we would be looking at 3.75% to 3.8% kind of number, but the reduction in the NIM, we hope to make it up through volumestic growth it does. So that is one aspect of it. And on the ROA, again, the kind, the current number is something going-forward we will not be able to defend this 1.89, I think we’ve been looking more at the 1.75% kind of number. Because as the business expands, as more of the business comes out-of-the deposits, the lever — as you rightly mentioned, the leverage is going to increase and that will have a consequence on that, on that.
Sarvesh Gupta
Okay, sir, thank you and all the best.
Salee S Nair
Thank you.
Operator
Thank you ladies and gentlemen, if you wish to ask a question, please press star and one. The next question comes from the line of Sana Mehta, an investor. Please go-ahead. Sana, if you can please unmute from your end and proceed with your question.
Sana Mehta
Good evening, sir. Thank you for the opportunity.
Salee S Nair
Good evening, Sana.
Sana Mehta
Hello.
Salee S Nair
I can hear you,. Yeah. Very much, very much.
Sana Mehta
The last question is, what are the initiatives taken in terms of ESG?
Salee S Nair
What we have done is we spent about INR1,400 crores to run this bank and this was entirely being — the entire operations has been done on a manual basis. So the first thing we are doing in that is to get this automated. We have just picked-up a vendor management system from Oracle and will be customized for us by the Deloitte. And one of the focus areas of that is to understand our scope, Scope 1 and Scope 2 expenditure and from there derive the emissions. And we are also engaging with the startup for to understand at a high-level what sort of emissions that we are doing on Scope 1 and Scope 2. I think that’s something that we have stated for next year. And for that, the data is going to be picked-up through the automation that we have just done. So the first step of getting the whole the vendor mechanism, vendor system, your electricity bill payments, your diesel buyout, the car, the whole is getting — getting in-place so that we have the data. And the second step, towards the end of next quarter, towards the end of next quarter, we will be going for a high-level high-level measurement of our own emissions. Also do Scope 1, Scope 2 and also look at the emissions on the Scope 3 side.
Sana Mehta
Okay. Sir, and one more thing from my side. I would like to give a small suggestion. That is, it would be really helpful if you can like upload the investor presentation two to three hours before the call, so that we can analyze the results.
Salee S Nair
Then I really, really apologize for you. In fact, that was in our intention, but unfortunately, you know the Board meeting because of the agenda that it had to sort of got extended, but we will take care of it going-forward.
Sana Mehta
Okay. Thanks a lot, sir.
Salee S Nair
Thank you,.
Sana Mehta
Congratulations.
Salee S Nair
Thank you.
Operator
Thank you. Ladies and gentlemen, a reminder, if you wish to ask a question, please press star and the next question comes from the line of Saket Kapoor from Kapoor; Company. Please go-ahead.
Salee S Nair
Saket
Operator
Saket, if you can unmute from your end and proceed with your question.
Saket Kapoor
Yes, yes, yes. You can hear me, sir. Am I audible?
Salee S Nair
Yeah, very much.
Saket Kapoor
Thank you., sir, and thank you for the opportunity firstly. Sir, the first point which you yourself mentioned that there is pressure on NIMs that is visible and it would be difficult for us to maintain the NIMs and hence the ROA and the other metrics.
Salee S Nair
Yeah.
Saket Kapoor
So is it only on the basis of cost of deposit, the cost of fund that has gone up, that is putting a pressure on the yield or what explains this lower trajectory going ahead and what steps are you taking?
Salee S Nair
Okay if you look at it quarter-on-quarter, we have actually improved the NIM. When I exclude the interest recovered on the written-off accounts, the interest recovered beyond the principal, what you recover here, it’s actually the interest and that gets added to the net interest income. And if you exclude such interest — generated from the written-off account and sanitize the net interest income for that and derive the net interest margin, you notice that quarter-on-quarter it is moving up. In fact, quarter one, it was 3.97%, quarter two, it has moved up to 3.98% and in-quarter three, it was 4%. The NIM that you have seen earlier, it also had a component of what I mentioned as the interest from the return-off accounts. But in fact, in response to your question earlier, because this also substant — because the leverage is low, we are working on a 6.5 leverage and the capital, it does not come at a cost at least on paper. So when you look at capital not coming at a cost, that adds to a better NIM. And as the leverage increases and we start operating more-and-more with deposits, the NIM is likely to — likely to moderate. But as I mentioned earlier, this moderation because your deposits are happening, consequences, advances are happening, it will be more than compensated by the volume. So going to have a dent at the profit final numbers, but the NIM at 4% because we are not on the unsecured, we are not on the credit card kind of numbers are enough. We are only on the secured lending side, it is bound to take a bit of a bit of a knock and we still believe that the next year end, we still can get to a 3.75% to 3.80% kind of number.
Saket Kapoor
So when you mentioned that the low leverage, can you explain what are you trying to assume I’m not well versened with your comment on we are at low leverage. So if you could just saying is
Salee S Nair
What I’m saying is a substantial percentage which would be how much? 6.5 leverage would be about 14% to 60%, 8,700 crores out of it is actually capital. So capital — the servicing cost in terms of dividends payouts, etc., right, and capital acquisition. But on the book, it is at zero cost. Part of your capital is at zero cost. And that adds — that sort of helps in maintaining in a certain NIM a few basis extra on the NIM.
Saket Kapoor
Yeah, got it. That’s it. So I’ll take it then offline. I still could not make it current.
Salee S Nair
Okay. I think we’ll explain that to you offline.
Saket Kapoor
Sir, but the point we are just trying to understand that the basis of the economic activities and the type of delinquencies we are seeing in terms of personal loans, the traction which was anticipated in the economy, things are not looking very good as such the economic data are reflecting. So given the current environment, if you could just give us some basic understanding how the — how the verticals are shaping up, especially in terms of our exposure to the retail segment and we see lot of delinquencies in terms of personal loans and also. So how are we aligned in terms of growing our book profitably — profitably and with lower delinquencies going ahead, sir.
Salee S Nair
No, I think on the delinquency side, on the NPA side, we will continue to show good, essentially because what we seeing across the banking industry, the delinquency, the stress sort of cropping out are largely related to the unsecured loan lending that is done by these banks. In our case, the unsecured lending that we have is less than half a percent. This is a bank that has always believed in the secured lending and the small segment of unsecured lending that we have is actually related to the — is related to the — it’s about INR200 crores or linked to the education loans. So it is a secured lending and the kind of the impact of whatever we are seeing in the market of delinquencies popping up or in the unsecured space, I don’t think that is going to touch us. Then, sir, because the 99.5% plus is secured lending.
Saket Kapoor
Okay. Then, sir, where-is the growth going to arrive when the economic indicators are not pointing towards growth as of now. And also we being a mid-sized bank, our cost of fund and the — and the cost of growing the capital will always be higher in comparison to the other banks. So what should investors look-forward from CMD going ahead, sir?
Salee S Nair
The growth on the — on the laborative side, I just mentioned that we have — we have put in-place two very clear drivers of growth, right? We have the NRI driver, we have the TBG driver. On the — on the asset side, we will continue to focus on the gold loans, which is giving us good traction. In addition to that, as I mentioned, we have created the credit management centers with — in fact, this has been done on a pilot basis in, this region in and we will expand into the other 11 regions in the early next year in the first-quarter of next year. And the focus of that is going to be the MSME, the MSME and the retail segment. And what we are also looking at is we are going to focus on the — on the turnaround time, on the speed of delivery and we are getting systems in-place automated systems in-place to achieve that. We have also taken a consultant on-board to help us get the entire credit management center automated from a credit delivery perspective. So once we have — once the turnaround time currently which is — which is which is — which is quite sizable, I’m not getting the number is brought down significantly. We believe that we have a market to peers. This is — we also have a loyal market. In addition to that, we also have a market waiting to peers, which we believe we’ll be able to do with the kind of automation, with the kind of significant and reduction in the turnaround time we hope to achieve maybe in the first maybe around second-quarter of next year when the systems is likely to go-live.
Vincent Menachery Devassy
The unsecured portfolio. We have education loan INR109 crore in the loan to MFI, maybe another INR150 crores. So INR250 crores of the total
Salee S Nair
Unsecured portion, you were — you did ask about the unsecured portion. I have the numbers here. We have INR109 crores of adequation loans, which is category — falling in the category of category of unsecured and another around INR150 crores of lending to the MFI which also is of — is also can be considered part of the unsecured where the delinquency can be enough people are worried about the very good side. So overall, it’s just about INR250 crores. That’s why I did mention that it is just about 0.5%.
Saket Kapoor
So two small points and I join the queue. Firstly, what portion of our loan book is towards the corporate sector and how are we approaching this segment because the growth, the yields, the competition is all towards the corporate side, whether it is mid-sized corporate or the large corporate, whoever we can cater to depending upon our reach? And secondly, sir, taking into account the lower NIM guidance given to — given rightly by you, what should we expect in terms of the profitability growth? We are almost at INR890 crores for nine months vis-a-vis 819 for the last nine months comparison. So ending this year and going ahead, how likely is the profitability chart trajectory going to be for some better understanding for your investors,
Salee S Nair
Yeah. And the first question, the carpet segment is a highly competitive segment and finely priced and that’s a segment that we will not be entering in a big way. In fact, we — our share of corporate segment is just about 7 point — it’s under 8%. So I think it will remain at that kind of kind of number, I think going-forward. So we will not be entering in a big way. We are mindful because the lower-ticket size is where we believe the yield can be better and we will stick to the MSME segment we’ll continue to stick to the — stick to the MSMA segment. On the profit side, will not be aiming say about going-forward, we will be investing heavily in the IT — IT because as part of the modernization, as part of the transformation of the bank, we have already initiated the process of branch process automation. We initiated the process of — I did mention the — in response to another query that we have already started the vendor management system, we have started the customer experience, the feeer on the etc. I think lot of investments are happening to modernize this bank. So your cost-to-income ratio is something that we would be looking at now. It might move a little up to about 50%, that’s my own reading of it. I’d rather see how the going-forward, the valuation of additional software that we intend to pick-up in our journey to modernize sort of pans out. But despite that, we will be looking at something around the CFO. I think we would be looking at a growth of about 10% to 10% to 12% — between 10% and 12% for the current year. When we close the year, we will be at a lower-end of 10% and upper-end of 12%. That is what we are aiming for in the current year. Going — next year is something that possibly I can give you a guidance in the first-quarter because the transformation journey is something that we really need to look at the kind of investment that is required before we give up but I can assure you that the business growth is going to happen and the momentum of even next year is going to be upwards of what I just mentioned for the current year.
Saket Kapoor
Sir, sorry to harpen on it. But when you mentioned that it will be — we will be — we will be investing more on technology and upgrading our system so that the could be also be recognized only. So where — which are the verticals from which — where we will be upping our loan book going ahead? And where — and what are the — what is our underlying strength that we are going to have more exposure towards the MSME and the RAM sector. If you could just allude, since our geographical presence is also limited, although, sir, we have a branch in Kolkata, I’m from West Bengal, but other than that, it becomes a — it becomes quite a bit for a small mid-cap bank in the current environment to source to — to go for deposit and the lending part also. So investors would like to get an understanding that there are some — there are definitely some missing link, that is the stock court below one-time book also and investors who have invested in the bank are not being able to get — gain the increase in-market cap, which is not evident in the — in the prices. And there is lesser interest also in the investing community with respect to PMD. So how are — how can these factors be corrected also steps taken to improvise and improve the investor confidence also because the business aspects are there, but that is not getting onto the ground with the investment community. That is what my basic understanding is.
Salee S Nair
Yeah, I understand,. Taking up from your first question, of course, you know, our focus area in the bank is going to be the MSME and retail. But without looking away from the agri — from the gold loan franchise that we have, I think that’s going fairly strong, that is — that has delivered a 35% growth year-on-year and that is something that we continue to focus. And apart from that, as I said, the focus is going to shift as much to the MSME and the retail. I think that is where there is a lot of market for our sized bank to we don’t find any death of potential there. So particularly when the kind of investments that we are making in the underwriting, the investments that we are making in the — in the automation of the process is going to have a significant — if we can deliver a 13% plus growth in the kind of systems that we are currently and the customers, the kind of system that we are envisaging going-forward, I don’t think your business or advances is going to be a challenge at all. That is one. You did mention that you are from. Yes, we do have a strategy in-place to look at branch — expanding the branches outside the state of Tamil Nadu and we will do it in a very calibrated fashion. And we are also looking at creating the credit management centers outside to ramp-up our or substantially reduce our turnaround time and ramp-up our advanced growth in that region as well. So that is one. And second on what we are mentioning about raising the investor confidence. I’m sure the investor confidence will flow-back as we demonstrate continuously that the numbers are at an acceptable level, which let me assure you that as I mentioned earlier, I don’t know that if you have listened to my initial remarks where I did mention that the business — total business has exceeded 10.4% and the advances growth has exceeded 13.5% or it was 13% 0.7%, which is the highest in 32 quarters. And the business growth is highest in 14 quarters. So the green shoots are there, the numbers are moving up and of course, one or two quarters of the numbers is not going to make a difference. The numbers sort of delivered as yet it’s not up to what we would like to sort of sort of. But as the numbers gets more-and-more evident, I’m sure the investors will come back to this table to the counter of TMP and the market valuations will go up. Rest assured that we are on-the-job to both improve the business and the profitability. And like I said, substantial transformation of the bank through automation of product, automation of the internal process and release productive impulses, which is going to have a solution impact — positive impact on the business and profitability going-forward.
Saket Kapoor
Yes, sir. Thanks. Thank you so much. Thank you. Yes, sir. Thank you. What is our sir? Yeah, I join the Q sir. Yeah, I joined.
Operator
Thank you. The next question comes from the line of Anand Mundra from My Temple Capital. Please go-ahead.
Anant Mundra
Hello. Good evening, sir. Thank you for the opportunity. I actually joined the call late, so you might have already answered. So pardon, just pardon me for that. I actually wanted to understand, sir, our cost-to-income ratio is quite good as compared to your prey peers. So it’s I think below 50% — between 45% and 50%. So I just wanted to understand because you’ve joined recently, you would want to hire your own team and spend on the tech and upgrade entire system, where do you see this number settling in the long-term? And I just don’t want to understand from a cost-to-income perspective, like I also wanted to understand overall our leverage is quite low. So as and when the leverage scales up, where would our NIM settle, where would our cost-to-income settle, what do you see the sustainable credit cost? And finally ROA and ROE. So that entire tree is something that I wanted to understand from a long-term perspective? That was my first question, sir.
Salee S Nair
I think I did mention this already, cost-to-income, we are looking at — touching about 50% is it. We are at 46%. I think it will move-up further as we start investing. And I think it will be in the 50% range
Anant Mundra
Okay. Okay. Okay. And sir, on the ROE
Salee S Nair
50% range and the next one that you did mention about what is the next one?
Anant Mundra
So the entire ROE tree, so as the leverage goes up because currently we have very-high capital. But as and when the leverage goes our leverage goes up
Salee S Nair
Yes, we would be looking at a slight reduction in the NIM and I just mentioned earlier in response to another call that we will be looking at 3.75% to 3.80%. And the reduction will be more than compensated by hopefully by the volume of the business that will accrue in, which I did mention that the volumes that we have achieved in the 3rd-quarter is — if you were not there in the call, it is the highest in the 14 quarters and the advances was highest in the 32 quarters. So that — so the green shoots are happening and I think the volumes going-forward, we hope to — hope to ramp-up — see that moving further up. And on the ROA, I did mention that ROAA would moderate a little more. I think it is at 1.89, but we will be defending at 1.75%.
Anant Mundra
Okay. So sir, this ROA of 1.75% is assuming what leverage. Can we do a 10x leverage with by defending 1.75% ROA
Salee S Nair
I have actually not done a backward calculation on it. You have done that. But you will be defending 1.7, right? What will be the leverage of 1.75? No, I think we have not done that. We’ll have the calculations maybe offline we can tell you. Okay.
Anant Mundra
All right. All right, all right. And sir, sir, one just one final question. So our CD ratio is I think north of 85%. So is it safe to assume
Salee S Nair
86%
Anant Mundra
Right? So is it safe to assume that our advances growth will be constrained with how much we can grow our deposit? Can we grow advances more than our deposits?
Salee S Nair
Yeah, that is — that is exactly what I was — I did mention this in response to another question and I also was looking at how the CD ratio was moving quarter-on-quarter. So that it was adverse in the first-quarter, it sort of was 5 times in the second-quarter and came down by 106% in the 3rd-quarter. And this — so we are beginning to see some amount of sustainable — sustainability in the CD ratio happening. And I think that in this current quarter, we are looking at bringing it below 100. I’m talking in terms of incremental — incremental CD ratio, okay. Once that starts trending down, once that comes below 100, it gets into the sustainable territory. Of course, your — going-forward, I think we will be coming into a much, much 80% — the kind of number that we are showing at 86% is the long-term thing that they are looking at currently, at least for the next year. But the trend is getting better and better. It is getting more-and-more sustainable. As we see the CD ratio come to 106% in incremental CD ratio come to 106% in-quarter three.
Anant Mundra
Okay.
Salee S Nair
So that was a worry for us earlier. Now I think that the concern is sort of coming down.
Anant Mundra
And sir, have you given any guidance for FY ’26?
Salee S Nair
I mean see this bank is on a transformation journey, which means there is a substantial investment happening in various sectors, various aspects of the banking. I did mention a few of them. We are trying to get papers out-of-the branches through the branch process automation, we are getting our credit process automated. So we want to focus and get it before we start the — certainly, I can give you guidance early-on in early next year, when we — when our — whatever we are — the journey that we have had — we have started starts yielding some kind of results. So right now, we are taking the pain of having the existing systems run along with the automated system parallelly. So we have that challenge. But on a — from a broader perspective, I did mention for the current year that we will be crossing 8% plus on the deposits and 30% plus on the advances. And the next year, from again a product perspective, which I may have to — but I may have to tweak depending on the kind of investments, depending on the process flow automation investments that we are making, would be deposit side
Vincent Menachery Devassy
You did mention 10%, right?
Salee S Nair
10% on the deposits and getting close to 14% on the advances in FY ’26, 14% to 15%.
Anant Mundra
Okay.
Salee S Nair
But again, this is all dependent on the kind of enough what we are looking at the investments taking off, the productivity impulses sort of getting delivered, which we should know by the first-quarter of next year.
Anant Mundra
Okay. Okay. Got it, sir. Got it, sir. Sir. I have a few more questions. I’ll get back-in the queue. Thank you.
Salee S Nair
Yeah.
Operator
Thank you. Ladies and gentlemen, in the interest of time, that was the last question. I now hand the conference over to Mr Nair for his closing comments
Salee S Nair
Like I was saying as in response to various questions that this bank is in the cusp of a new journey I think we are we are looking at this a negative bank manually run substantially and so we are doing a lot of investment in a variety of areas in the banking space. I just mentioned about the credit underwriting, credit automation. We have also set-up enough focus units for driving the — driving and strengthening the deposit franchisee. And I believe these are going to yield results in the quarters to come. And that is directly and positively pointed by the profit and profitability and the return-on-equity as well. So this quarter has been from that perspective, some a demonstrative quarter where we have seen the business in a break from the previous muted growth and we have seen like I mentioned across the business — the aggregate business crossing for the 10% for the first time. And that’s something that we will build-on quarter-after-quarter. Each quarter, you will see an improvement in the percentage of growth in the — in the total business. And that’s something we are — at CMP, we are committed to. Thank you. You want to add some.
Vincent Menachery Devassy
Yeah, thank you.
Operator
Thank you. On behalf of Tamil Nar Mercantile Bank Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.
Salee S Nair
Thank you.