TAMILNAD MERCANTILE BANK (NSE: TMB) Q4 2025 Earnings Call dated Apr. 24, 2025
Corporate Participants:
Salee S Nair — Managing Director and CEO
Unidentified Speaker
Analysts:
Manish — Analyst
Hitaindra Pradhan — Analyst
M.B. Mahesh — Analyst
Unidentified Participant
Saket Kapoor — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Q4 and FY ’25 Conference Call hosted by Thamil Nad Bank. This conference call may contain certain forward-looking statements based on the beliefs, opinions and expectations as on-date of this call. These statements are not the guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. Thank you as a reminder, all participant lines will be 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 an operator by pressing the star then zero on your touchstone phone. Today on the call, we have with us the following management representatives, Mr Sally S Nair, Managing Director; Mr Vincent, Executive Director; and Mr Sanjay Kumar Goel, Chief Financial Officer. I now hand the conference over to Mr S, Managing Director from and Bank. Thank you, and over to you, sir.
Salee S Nair — Managing Director and CEO
Thank you. Thank you. Thank you and thank you also for the introduction. Yes, I think we have come out with our results yesterday and as you would see that the results are in-line with what we had stated earlier as well. And in fact, some of the highlights I can go through before getting into the details.
And this — in FY ’25, we have delivered the highest-ever net profit. If you go back-in history, 103 years of the bank’s existence, we have been delivering profit year-on-year except for six years in our journey. So this year is another year where we have delivered a net profit of INR1,183 crores. That’s a 10% plus growth year-on-year.
So it’s also — we’ve also delivered an operating profit growth of INR1,746 crores, an 18% up from the previous year and a total income, which is 12% up from the previous year at INR6,142 crores. While these are highest-ever numbers, if you look at the GNPA, there is a lowest in the last 10 years at 1.2% tons, the GNPA, it is the lowest in the last 10 years. If I get into some of the the total business, the total business has improved 9.58% to 98,98,055 crores.
If I get a bit of color on this like I mentioned last-time that the deposit will double by the year end, it has in fact more than doubled if you look at 3.66% was the deposit growth in FY ’24. We really, really underperformed the market. So this year FY ’24 the growth the green suits are very, very clearly not as visible, it is taking clear routes. So the number is 8.43% year-on-year. We did INR53,689 crores. So on the resource front, we are getting back into the game.
Even in the advances side, we have almost doubled — almost double what we did in FY 2024. 6.35% was in FY ’24. Now we have just about that 11% and so going-forward, we will align ourselves to the market. We are beginning to be aligned to the market and FY ’26, you will see that we are aligned to the market, perhaps even a targe better.
So on the ramp on the — on the portfolio, on the asset portfolio itself, 93% today stands at RAM, 93%, this is up Nathan, 91% and that’s one of the reasons why our spreads levels are that levels that we are going to — I’m going to state as we go along. The total income, as I said, 11.82% up. Then a net profit at 10.35% up, the book-value. The book-value per share today is at as on 31st March is at INR569, that’s a growth of 13.80.
The CRAR, the capital ratio of 32.71%, that is up 334 basis-points. So I think one of the best perhaps in the industry. The SMA to growth advances, I did mention about the GNPA that we have for the 10-year low, even the SMA case fairly good at 2.55%. So both together, this level of SMA and NPA together is just 3.80%.
So that’s where we stand from a credit quality perspective. The stress asset ratio, that includes the restructured assets is down to 2.01% to 2.21%, the gross NPA as I said earlier is down 19 basis to 1.25%. The net NPA is at 0.36%, down 49 basis is less than half. And ROA for the year is at 1.88%. And I’m sure we have of course, and the of yesterday proposed a dividend of 110%, which of course would be subject to the AGM.
So when I get into some more details, I did mention about 9.5% to 8% growth happening on this total business. And the shareholder value when I look at it, net-worth case has crossed INR9,000 crores. It was INR7,921 for ’21, it is a tax of INR9 crores. The book-value per share I just mentioned, INR68.9 sir and the earnings per share earnings per share is INR74.68 I think it’s also an all-time high so moving on to some of the parameters, net interest income is at INR2,301 crores.
The operating profit I mentioned earlier, INR1,746 crores, and the PCR, when I look at the PCR, with technical write-off that is the off-balance sheet provisioning, it is at 93.86%. But what is important is the PCR on-book, it is at 71.02%. In fact, we have more than met the RBI guidelines on this where RPA was suggesting about 70%. 31st ’25, it is at 71.02%. And nearly 30% up from the previous year. In FY ’24, it was only 41.33%. The PCR on-book today is at 71.02%.
Our return on asset I mentioned is at 1.88%, the return-on-equity is about 14%, credit cost 41 basis-points — 41 basis-points. Cost of deposits has moved up in-line with the market, right? It is at 5.91% up to 17 basis from 5.74% and yield on advances is at 10.22%, growing a little slower than the deposits from 10.15% that is up about 7 basis-points. The cost-to-income ratio the efficiency of the running of the banks is driven is down from 47% the previous year to 44.60% in FY ’25.
So that’s in the cost-income ratio. When I move on — give you some color on the asset quality. I think I think the asset quality that we are delivering in this, I understand will be one of the best-in the industry, NPA at 1.25%, net NPA at 0.36% and the slippage ratio is just 13 basis-points. It’s made — maintained in the last quarter also it was 13 basis-points. In the last quarter of FY ’24, it was 16 basis-points. So you’ll see some improvement happening there,
I think the 13 basis is really a really a stippage that we are quite proud of. When I also look at gold loan portfolio, I think because a significant amount of our portfolio is gold loan. The SMA in the gold loan portfolio is just 0.06%. We have an 18,000 plus gold loan portfolio. The SMI is just 0.06% and the NPA is 0.01%. Let me also tell you that during — in FY ’25, we nearly 4,000 row loans, dual loans.
And we have not yet recovered our principal and interest. We actually returned INR1.46 crores back to the — back to the borrowers, which means we are, you know, giving the adequacy of the margin, evalencing the adequacy of the margin. And there was no portfolio loss on the quality of — on the portfolio. And I think that’s a portfolio that we are watching very closely from the LGB perspective, from the commodity risk perspective and monitor versally on a day-to-day basis.
When I look at the movement of LPA, I did mention that we had a 1.25% GNPA. The gross LPA that we have is INR556 crores. And the — it is — let me also tell you it is not because of write-offs. Write-off was just INR25.59 crore. It has been because of upgrades and cash recovery. In fact, the cash recovery was INR79.16 crores, write-off — sorry, and upgraduction was about INR10 crores. But almost INR50 crores came from From — came from hard work that we have put in and just more or less offset the fresh addition that happened. So the closing is at INR556 that is down about INR20 crores from the previous year. And like I said, the GNPA is at 1.25%. If the provision of 363.50 takes the net NPA to 160 is that is versus 6 basis-points. And like I said earlier, the PCI is at 71.02%. Even in the SMA, as the SMA is a story that I would really like to say because it’s in FY ’25, the SMA or the overall SMA portfolio, which was at 3.97% has come down to 2.5%. So that’s. And then this not just the NPA, even on the SMA side, this bank has got its app right and we will continue — continue maintaining it. And even looking at the sector-wise also, even in retail sector, we have about 1.3% of the is only retail agri by 0.07, MSMB 1.08 and the others at 0.10, totaling to 2.55%. SMA plus NPA, that is in a portfolio one day past-due, even one day regular. The portion of the portfolio that is one-day regular is 3.80%, 3.80%, which means 96.20% has no irregularity whatsoever in the portfolio. I think that kind of quality of portfolio that we are that TMB is locating that no plus the is down from 2.70% to 2.01% I think the presentation has already been uploaded in the — I’ll keep some of these assets and come to some something relevant for — from both the quality of the portfolio perspective, which is the PCR and the collateral coverage. I think if somebody is referring to the presentation in slide number 21. We had — as I mentioned earlier, we have a INR556 INR156 crores of GNPA, that’s 1.25% and a INR63.50 crores of provision. But let me tell you the INR556 crores of GNPA is converted by collateral of 104%, which means provision when these gets resolved, when the DSA get resolved, we are looking to book this INR300 crores plus or INR350 crores plus of provision has write-back that is a substantial future profits are sort of hidden provisions. On the growth itself, I did mention earlier that we are doubled the current account and the CASA per se has been a worry for us. And I will also tell you how we are trying to address that because we have lost about 300 basis plus on the CAPA share, which had a bit of an impact on the NIM. But the initiatives that we have taken in the last quarter, I think towards the end has standard bearing tools and we saw some uptick happening towards the end of last — last quarter of FY ’25. We have seen a growth of. They are. This overall of given 8.43% and I think debt deposits did contribute significantly to that, the 3.37% of the growth coming from coming from the debt deposits, of course, more than compensating the CASA — the CASA loss, but that’s something that we will reverse — beginning to show some and I think that will be accelerated into in the current year. To reverse the CASA, we have taken a number of initiatives. We have — I think last early, I did mention that we are setting up a transaction business manufacturing banking group. We have in fact set that up in February and it has sort of started functioning. There is a significant number of managers have been, I mean onboarded projects. I think they are in the market and we are beginning to see some signs of an uptick in the current accounts, particularly and the government accounts and I’m sure that will get accelerated. But that’s another way since this CASA is going to be tackled. We also set-up the global NRA center, which I had stated that in the last call, that also has been set-up again towards the end-of-the quarter — last quarter, so we are going to see a significant results coming out of that. We have also taken an additional initiative to set-up an elite services. Now to wing are a high-net worth of the liability franchisee customers, deposit customers and not really them also to look at, you know, building upon their relationship and also ramping-up the customer. The other piece that we are looking at to ramp-up the CASA is we are completely the digital banking. We are bringing in an entirely new internet banking. We have already signed the deal. I think in a couple of quarters, I think the entire interest banking is still and the services that will be provided through the interest banking is going to go — undergo a dramatic change there. And on the advantages portfolio, yes, 11% growth. Retail at 8.35, sector is flat. But let me tell you the MSM sector within the MSME that we are tackling that above 50 lakh have store an decent growth of 12%. So the de-growth is happening in the sector below 50 lakhs. And our CD ratio in Q4 as the — as the deposit momentum fix of CD ratio has also moderized at 82.64%. So there was one question on the unsecured exposure, bank and secured exposure in last — last December, let me tell you that our total unsecured exposure at INR160.60 crores, that is 0.36% of our portfolio is only unsecured. And if I look at the SMA, out of INR160, INR7.70 odd crores and 4.79% is SMA and LPA is just 19 basis-points. And if I go a little deeper than unsecured exposure, INR16.59 crores, which I just said it. KCC contributed INR15.54 crores, INR28 crores came from education loans, INR41 crores from the other. INR75 crores came from PSU, which as you know that is — the quality is always accepted. So INR160 crores unset growth. So it’s not a — there is of no worry on unsecured exposure at all. And there was also a question on what the export MFI. Let me tell you the MFI exports or total exposure to MFI is just INR23.90 crores. That is just about 5 basis-points of our — of our portfolio. Now I did mention about the last call, investor call about the carving out the credits from some of the branches and refocusing the branches on the deposits and strengthening the deposit franchise. And I think we have already started the pilot and our experience have been quite good. We are, I think pretty much almost completed the business rule engine. The loan origination system and loan management system has been sourced. I think it will take a couple of quarters before it comes fully on and the lead tracking system, the customer experience in the retracking system has also been sourced and put in-place. And so a lot of IT initiatives that we have started in December and going to January, February has — has come down and I think for this to come delivering results, I expect another couple of quarters. But meanwhile, I expect this bank to grow our growth to be aligned with the market like you mentioned, perhaps a higher than the market. So that is where I — and apart from that, we have also taken human, I did give a color of that earlier that the historic has been implemented in FY ’25. That has today 81% of the population of the — of the staff component on the company method and we have Also implemented a capital management system, an automated capital management system which apart from helping an end-to-end HR management also helps us to have the CGC pay, in particularly the variable pace of the bank profit. So we are slowly getting the ground post aligning to the profit motives of the brand. So I — and of course, we did the over 26 margins, we put a few largers on-road looking for perhaps a change in the location, etc. And in the current year, in fact, in the current half year itself, we are looking to open about 50 or so branches. So that hopefully should take our — this number of branches to beyond 600 today it is at 578. So I will — I will take questions. I think I’ll just here and I will take some questions here.
Operator
Thank you. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star N1 on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star N2. Participants are requested to use handset while asking a question.
Questions and Answers:
Operator
Ladies and gentlemen, we will wait for a moment while the question queue assembles ladies and gentlemen, if you wish to ask a question, you may press star and one at this time. Thank you. The first question is from the line of Manish Jain from Wealthcare Securities. Please go-ahead.
Manish
Yeah, sir. Thank you for the opportunity. Sir, what is the advances growth forecast for this year as well as deposit growth forecast for this year — for the coming year.
Salee S Nair
So in FY ’26, we are looking at a combined growth of 13% to 14%. Because we believe that the initiatives that we have put in-place would start taking roots. But the first couple of quarters would have been a challenge as we get into the change mode as a lot of initiatives are getting implemented, bit of a disruption.
But in the second-half, we expect a significant benefit accruing out of it. So overall, for the year, we expect 13% to 14% 13% to 14% of growth, I mean business growth. And within that, deposits would be in the 11% to 12.5% range and advances could be anywhere between 15% to 15% to 18%.
Manish
Okay. And what kind of a guidance is there for NIM, sir?
Salee S Nair
NIM would moderate — moderate a bit, but of course, the rate cuts are happening. The NIMs would moderate a bit. When I look at the kind of CASA growth we are looking for with particularly the TBG or the transaction business group in-place, we expect the CAPAC growth to be higher than the overall deposit growth moderating the — to some extent, extent the deposit cost of deposit would be in the 3 point I would say in the 3.80% kind of number, 3.80% to 3.90%. 3
Manish
.8% to 3.9%.
Salee S Nair
Yeah. Sir, the bank will get 9%.
Manish
Yes. Yes, okay, sir. Okay. That’s nice to hear, sir. And sir, about this cost of deposit and other initiatives, whatever you are talking about. So sir, at present, where are we in — like in the last con-call, you had told that by the next year, you will be able to give a guidance about all the new initiatives. So at present?
Salee S Nair
Yeah. I think I did mention some of it already. The CMC that with the carving out-of-the projects on the branches we have implemented in one of the regions, that is something that I promised last-time. It has already been done in the Totu region, which is the biggest region for the bank. We have already implemented that. The experience are along with the implementation are carving out or the credit processes there.
We have put in-place a significant resource for the relationship side and onboarding of new customers that’s happening. We have also put in-place the LOS NOS and the LMS because TMC would tackle both the retail and the MSME and the agri, the entire credit, as I mentioned earlier. So that also has been inked. That is one. And the other aspect is that we have also just about completed the construction of the business rule engine that is undergoing testing at the moment.
I think that would be a — towards the end-of-the current quarter itself, I believe that would be made available. So that would be enough center for it. And with the automation, a significant automation in the appraisal process, we expect the turnaround time to come down sharply and making us a very competitive player in the marketplace. So that’s something that we expect to get benefit of that.
That’s the reason I mentioned earlier that in the advances, we are in projecting something higher than what we saw. We got a growth of 11% in the current year — sorry, in FY ’25, we are projecting upwards of 15%. So that’s only on the — on the advances side. To drive — to align ourselves to the market, we have also verticalize the bank in the sense that we have created eight verticals within the bank, each driving a specific business area and not driving the business area,
Also trying to get you know aligned within that business area to what is happening in the market to check into what is happening in the market or create new products, revive existing product to so to refine the processors, simplify and improve the productivity within the basic — within that business area we have created — also created eight verticals for each in the asset side and the liability side. So that’s the other piece that I didn’t mention earlier, that’s something that we have.
We have put in-place with very, very, very clear budgets to tackle. And as I said earlier, 81% of the bank ground post today is on CTC with their — with their variable pay increasingly aligned to the bank’s pockets.
Manish
Yeah, sir, another one question was regarding the advances growth which you are projecting of 15% to 18%. Sir, I think the norms of Reserve Bank regarding the gold loans and everything in the recent days and our exposure to the gold loans based by loans are — is quite okay, quite good. So that makes you more confident of 15% to 18% growth and same extension — extension to that question.
And if there is a loan growth of 15% to 18% and the NIM which you are projecting from 3.8% to 3.9% and there is a lot of hidden provisions. So we can expect a profit growth of 20% to 25% possible?
Salee S Nair
No, no. I don’t think on the profit front, we are projecting that kind of a couple of things that we will be looking at this year. One, of course, is a significant amount of capex happening. Right. We did — we did spend about INR155 crores on the IT side last year. But this year, I am seeing a significant ramp-up of that.
In fact, whatever we have contracted already by way of IT assets and automation processes that we are sourcing, I think some of the payments are going to happen this year. And apart from that, some of the branches that we have, the physical branches that we have, we are also looking at how we can modern enough model with a modern outlook and a modern ambience. So some amount of — some amount of expenditure is going to happen there.
I think we are trying to look — clean-up at least 50 of the branches and reorient these branches as ESG branches, LE services branches looking at high-net worth. So that’s going to have some kind of some kind of capital expense is going to go there. So I’m — while I’m just mentioned about 14%, 13% to 14% growth happening, I am not — I think the profit will Possibly be aligned to that, it would not be greater than that. In fact, I’ve been looking at 20% at 10% to 12% growth for the — perhaps closer to 12% for the current year. So because this is the year when a significant amount of capex is happening, but we will ensure that the CR is at 50% and lower than 50%.
Manish
So sir, this will be the last year of all of this channel except
Salee S Nair
We ramp-up the quality of the portfolio. So some like I said, 3.80% to 3.9 so some moderation of the NIM also will happen, which will contribute to that. But the profits certainly will be higher than the gross profit that we have delivered this year. We did deliver 10.35% and the FY ’26 profit will be higher than that.
Manish
Sir, but this will be our last year of this maximum capex we’ll get over in this year?
Salee S Nair
It will be over. It will be over. Yes. Okay, sir. Thank you so much for answering all your questions. We will continue to be investing, but you know, I think they will be fully-loaded into the current year and FY ’27 is the year that you have to watch for.
Manish
Okay, sir. Thank you so much for answering all the questions. Best of luck.
Salee S Nair
Thank you.
Operator
Thank you. The next question is from the line of Hitendra Pradhan from Maximal Capital. Please go-ahead.
Hitaindra Pradhan
Hi, sir. Thanks for the opportunity. So sorry if I missed this. So you mentioned the cost-to-income would stay little elevated or will it normalize for the?
Salee S Nair
And on cost-to-income, in fact, in the current year, we have brought it down. I think it is at 44%. Right, right, right. It might move-up and but as I said, the cost-income will be maintained below 50%.
Hitaindra Pradhan
Right, right, sir. And your sir, the guidance on ROA was around 1.75% earlier. So is it still at that level
Salee S Nair
Or EBIT will still be at 1.75%? Yes. Of course, this year, we — FY ’25, we delivered 1.8%, but there’ll be some moderation 1.45 to 1.80, yeah.
Hitaindra Pradhan
And you see your credit cost and slippages have been pretty impressive. So you see it sustaining at that level or you see some surprises. No, I think we have already factored in the surprises.
Salee S Nair
No, I think we have already factored in the surprises. So let me tell you in FY ’25, the largest NPA that we have, which is almost 30% of the overall NPA book, the TNPA, we have fully provided, okay. And we — if we can recoup that in the current year where there is a possibility, then that will be where that will add to the guidance that I’ve said of 10% to 12% of net profit growth.
So I think I don’t find much of a happening on the — on the GNPA side as we did, we have delivered 1.25% with a 71% PCR. Going-forward, as well, I think the 1.25% would be different.
Hitaindra Pradhan
Okay, sir. Yeah. That’s all from my side. Thank you.
Operator
Thank you. The next question is from the line of M.B. Mahesh from Kotak Securities. Please go-ahead.
M.B. Mahesh
Hey, hi. Just a couple of questions. I’m sorry, it’s kind of a bit late. On the — just to kind of add-on to the previous questions — question that was asked. In your sense, what is the kind of feedback that you seem to be getting from your customers of the situation on-the-ground, especially with respect to exporters and importers,
Hitaindra Pradhan
Sorry, you mention no, just asking that hello.
M.B. Mahesh
Yeah. Hello.
Salee S Nair
Yeah, go-ahead, go-ahead. I can hear you.
M.B. Mahesh
Yeah, sorry. I’m sorry, I’ll just repeat the question here. The question is that when you look at the situation on-the-ground and when you ask your business head about what the feedback is with respect to the implications of — of your customers on what’s happening on the global side, how are we looking at FY ’26 and how are you responding to it, sir
Salee S Nair
First sadly, at the bank-wide level, I think the trade finance is one area we are really focusing on. Okay. And I’ll come to the macro a little later. That’s something that we are focusing on. And we are also having trade special — sorry, trade finance specialists onboarded into the CMC setup. I did mention that to you, you have come a little late. So let me recap for you, we are putting in-place credit management centers.
We have already done that sure. In 2020 as a private, the experience is good and we are ramping it up to the other regions as well. We have 12 of them. And we are putting in trade finance specialists, product specialists to ramp-up this one area we believe given the kind of that we have, we can really ramp-up in terms of fee income, the ForEx side of it and the trade finance item. So that’s the first part of it. So that’s the only part of it.
But when I look at what is the changes that are happening across the world, particularly the US, the tariff, et-cetera, it has not really impacted our segment as of now. I don’t see any kind of significant changes that is happening into the kind of movement in the export or imports that is nothing through our book currently.
But keeping a watch on that and we are taking — like I said, we have put in — we are putting in-place specialists to specifically look at the movement and the changes that are happening and how we can protect our fee income from it along with giving guidance to the customers on how they can tackle it?
M.B. Mahesh
Okay, perfect. And the second question, sir, in general, have you seen an improvement in pricing for loans, a deterioration in pricing of loans from — in terms of the competitive intensity from where we are today?
Salee S Nair
Pricing of loans, of course, we have already seen two rate cuts now already 58%. So that’s sort of having an overhang on our pricing per se in the sense from an absolute perspective. Consciously also, we are trying to moderate particularly the MSME pricing a little. I did mention that the NIM that we will be looking for is. So in that range for the current year, year that also and looks at a bit of a pricing moderation for our MSME portfolio.
And sir, the intention is to move into the market and look for new business where pricing would be a challenge. So that is the factor-in. Yes, even in the existing book, we have come across pricing challenges, but that is being — that has already been trackled in the current year in FY ’25 and of course, there will continue to be tackled going-forward as well. And I’m confident of the good as
M.B. Mahesh
Perfect. Thank you.
Operator
Thank you. Participants who wish to ask a question may press star and one on their touchdown telephone. Thank you. The next question is from the line of Sharma, an Individual Investor. Please go-ahead.
Unidentified Participant
Hi, sir.. Congratulations for the good set of numbers. I just have one question. Sir, has two questions. First question is like we have 425 branches in Nadu and the rest of the state we have one or two and some states, it’s a double-digit. What are the plans we have because we have opened 26 branches during FY ’25.
What are the plan for FY ’26? And are we only concentrating on some other or are we going to some other state? This is my first question.
Salee S Nair
So we are looking to open 50 branches in the first two or 3/4 itself, so that we do get 50 branches in the first two or 3/4. Hopefully in the first two quarters itself, maybe there could be a spillover, but certainly before the end of December. And we are hoping to open half of these branches in potential growth areas outside the state of.
Unidentified Participant
Okay. So what is the full-year number?
Salee S Nair
Would be a number would be 50? Million? So by second part of the question correct, what is your low out of? Where you want to have at least 300, 200 branches in next three years four years? What are the states you are targeting? That’s my question. Second question.
Unidentified Participant
So by second part of the question correct, what is your low out of? Where you want to have at least 300, 200 branches in next three years four years? What are the states you are targeting? That’s my question. Second question.
Salee S Nair
I think when I look at the profile, with 75% of the branches within the state of Tamil Nadu. Going-forward, we are trying to drop this down to 60%. So that will be a three-year venture. I think I did mention this in the last call as well.
M.B. Mahesh
Yes, yes, yes, yes. So my second question, sir what about our appointment and as a? Where are we on the?
Salee S Nair
No clear. What is?
Unidentified Participant
Can you receive appointment sorry, what did you say? Why is not here? The CEO appointment, Bank of CEO, MD and CEO appointment. MDU are there in CEO appointment.
Salee S Nair
No, we’ll take a call at the appropriate time. The bandwidth, management bandwidth is now strong and I think that is getting also reflected in the in the results that we are seeing. It is strong. I think we that pretty much all the you know the positions at the — at the by present level is now full. And we will look at the occupancy now as a problem.
Unidentified Participant
My final and last and final question is whether we are on-track to achieve 15% to 18% ROE by FY ’26 or 2017 and when do you think we will achieve that number? 18% ROE, 15% to 18%
Salee S Nair
ROE ROEs I don’t anticipate that. I think FY ’26, we will try and the number that we looked at in FY ’25, which is about 14% is something that will continue perhaps a little better for FY 2026. But FY ’27 will be better, but 18%, I think will be yearly. I’m fine, just of it for FY ’26.
Unidentified Participant
Yeah. Thank you.
Operator
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Saket Kapoor from Kapoor; Company. Please go-ahead.
Saket Kapoor
Yeah. Namaska team and thank you for this opportunity. Sir, I joined a bit late, so sorry for any repetitive question. But sir, you mentioned in answer to a question that FY ’27 would be the year to watch if in terms of the profitability growth and for the investing community as a whole. So if you could just allude to us what factors will culminate by — from two years from now or what levers will be in play that will result in that year to be a year two record for the company — for the bank.
Salee S Nair
FY — FY ’27 is only a year from now, right, we are talking about next year. Correct. Why is? One, of course, I’ve also said that — said that we would be largely aligned to the market growth in FY ’26 itself. I did mention that we will have a 13% to 14% growth. That is the first part of it. And this is going to happen despite — despite the fact that we anticipate some disruption to the changes that we are bringing in.
We have got in a lot of initiatives both on the HR side and as well as on the technology side, the processors are being automated. There’s a whole lot of — a whole lot of changes that are being made. As the ground force gets attuned to these changes, we anticipate a bit of disruption that’s happened.
That is why I said that the kind of growth that we would love to see in the current year may happen only in the next year because you know, while the ground gets acromatized to the changes and start delivering the productivity that we are envisaging from these changes, I think — I think this year we will see the bank aligning to the market as perhaps going little better, but next year, I think the full benefits of the initiatives would be made available and we see a significantly higher-
Saket Kapoor
Growth significant for the benefit of your investors, could you outline what are the destructive changes that have been put into place and how are they going to play-out in terms of the profitability? And sir, Q-on-Q, we have seen that even though our net interest earn has gone up, but our operating profit were flat.
So if you could just comment two points and then I have two more questions, please
Salee S Nair
The first aspect is that you know we have created very clear eight verticals in the bank with clear business targets and that’s on the asset side and on the liability side. That is the first thing that we have done. And each of them have been given you know, look at-the-market, look at the products in the market, refine the products that we have, refined the process of that we have in terms of delivery of these products, automate the processor delivery and
I think they have been given very, very specific targets of how to meet the competition dead off. That is one aspect of it. So the verticalization of the bank. It has been brought about from that perspective. Second, as I think I mentioned earlier also in the last few about half-an-hour or so, about the changes that we are bringing in the automation that we are bringing in, the kind of credit and the credit management centers that we have brought in to standardize the debt and benefit from the scales of economics — economic of scales rather and that’s one major thing that we have brought in the way that we are conducting our operations.
We have also brought in a transaction business the global NRI centers owned in attracting now. We have significant pressures where the NRAs are concentrated and we want to take advantage of that. We have brought in the global NRI center. We have now set-up in this month — in the month of April, as just about a week back, services group, which of course will take a bit of time to take rules to ring-fence our high-net worth individual ramp-up their value for the bank in terms of both product offerings and their outstandings in CASA and the term deposits.
So that ESG is something that we have taken roots. And as I mentioned that the HR initiatives we are going-in for a major skilling program, we have in fact conducted a test across all our HR human resources test conducted to understand the talent. I think that test has been conducted across all the ground pools that we have on the test was conducted by the Indian Institute Banking and Finance to understand where their talent lies so that we can appropriately deploy them.
That has just been completed, that has been completed and our redeployment is based on a significant latex inputs from that as well. So HR is the — HR skilling is a major activity that we are engaged in. As I said earlier, the wage revision that we have started, which is historic in nature is now has 81% of the there, the HR 4th that we have on the CTC model, where it is aligned to the profit generation that component is aligned to the profit — sorry, the profit ambition of the bank. So a lot of initiatives have been taken and on the IT side, and significant capex is happening.
Internet banking has been completely revamped with a significant amount of services to be provided through the internal banking that is on. I think we will see that how we can avoid our customers from coming to the brands and have all the services delivered through other channels, other digital channels,
I think that’s a major — major one. I think it will take a couple of quarters and maybe it will move into the 3rd-quarter before we see the benefits of that — benefits of the changes in that. The automation of the credit system, as I said earlier, is on the business rule engine to tackle the low-value accounts up to 50 lakh in an automated fashion, decisioning based on the on the data, that’s as pretty much completed.
It’s in the testing phase. LOA has LMS to manage end-to-end of an credit customers, that’s that is all getting done. Take another couple of quarters before it sort of rectify and start delivering profits or sorry and business. So there is a significant many, many initiatives have been taken and I anticipate all this to deliver results going-forward, certainly partly in the current year and certainly in our certainly mana in FY ’27.
Saket Kapoor
Okay. Sir, thank you for the elaborate answer. You did alluded to 15% growth that is what we should envisage in the — our net profit for this financial year, sir. That is what you are looking-forward?
Salee S Nair
No, I have to say 15% growth. I said 10% to 12% more larger 12% growth. In the current year. In the current year.
Saket Kapoor
No, I think you also spoke something about our profitability rising by may implant to increase by 15% for this financial year, that is I think I heard you mentioning that also.
Salee S Nair
I didn’t see on that. I didn’t say on that. Okay. Okay. And 14%. And you know the — no, I — what I did mention is that I did mention 10% to 12% In the — on the net profit the net profit because of the capex that we will be undertaking as a one-time effort both in the branches and the physical appearance of the branches as well as in the digital appearance of the branch, our digital appearance of the bank. So some — so that we will do a takeaway. What I did mention was that on the GNPA front that we have a particular account with a 30% where 30% of the current GNPA is on account of a particular account. If it gets resolved in the current year and it hasn’t fully provided. So that would be a for. So that’s what I mentioned. I did not mention about 15%.
Saket Kapoor
Okay. And sir, which sector is it? I just conclude my talk. Which sector the GMP is which you are mentioning 30% of the the market. Which segment sir, which industry, sir?
Salee S Nair
Let me spinning tax spending sector.
Saket Kapoor
And sir, lastly, sir, are we fully-funded to fund the growth or we would be needing any type of equity infusion or bond issuance to fund the growth for FY ’27 and onwards? And secondly, sir, the Reserve Bank stand-on — the stand-on monetary policy are now becoming accommodative and going ahead also going to remain accommodative for the near-future and also the abundant liquidity in the system,
How do we see that playing out in terms of the profitability in terms of the NIMs and other factors because you have already lowered the NIMs trajectory to 3.8 I think for this financial year. Now with liquidity and things improving, how is banks of our size aligned to the current monetary environment in the country?
Salee S Nair
Yeah, first question, part of your question about additional funds. I think with a CR ratio of 32.71%, that is up 334% in the year itself. I don’t think in the foreseeable future, we will be requiring funding from the capital markets. That is one. I think our challenge is to spread extra funds that we have in terms of growth. I think that’s where we’ll be focusing on. The growth is where I think our single-minded focus is on currently.
And I did mention — when I mentioned NIM of 3.80%, 3.90. We have already factored in a possible 50 basis cut.
Saket Kapoor
Yes, that is correct, sir. So I was just trying to understand if earlier the NIM improved when we were in an environment where there was a tightening of liquidity. And now we are in an environment where liquidity will be in abundant and the growth from the — it will be the corporate whose capex and all will be driving the growth, which is not in the annual as of now.
So how is the banking system aligned, especially in terms of the small-sized bank of our nature, which are specific to a specific geography? So that was my question, sir.
Salee S Nair
Yeah. Yeah. So that’s an advantage that we have. In fact, large-sized banks like a State Bank of India will mirror what is happening in the market much more transparent way. But on the bank side, I think our pocket of are greater when we are strong for us to withstand some of these pressures. On the — on the — you are what you mentioned about the liquidity easing, yes, it is easing and but see so long as the — it’s not felt on the deposit rates.
We are looking at the deposits and the rates continuing with the existing — we are anticipating that deposit market would continue to be a challenge. We will have to look at how the capex plan is happening, the income tax relief that has happened, how it is going to play-out, how the mutual fund of the move towards the mutual fund in terms of the SIP is going to play-out and how the larger industry in terms of the pricing of the deposits, the particular term deposit is going to play-out when we look at the NIM.
To put a further color to it, from I did mention that we have started the transaction business growth. From the focus on the current account space and the services group that I did mention subsequently is going to focus on this piece.
So CASA is going to going to be a major focus for us, which we are trying to — even if the deposit enough for the market becomes a little tight and we would use the CASA as a means of keeping the — keeping the cost of deposits under control. And you know, if the things ease out and if the anticipated liquidity happens the flow of funds into the bagging sector happens, bonus first.
Saket Kapoor
Yes, sir. Thank you sir, for elaborating the answer. And sir, we as investors hope that market will also start valuing the enterprise value also we are trading much below even one-time book and taking into account, I think the INR550 I think the book-value, correct me there, it is a very — when it is for investors waiting time
For a period — for a very, very long period so should we get adequately rewarded. So we are in the — still in the wait mode only to reap gains from being remaining investors in. That was only my concluding remarks that the wait has been very long for us.
Salee S Nair
Yeah. Anything like I said, we are fully aligned to it. I myself an investor in TMB and we are fully aligned to it. And our — whatever we are trying to do is to generate the kind of growth. Like I said, from FY ’24 to FY ’24, the growth has doubled in deposit is more than. And of course, the initiatives that we have taken is to food from that manner. This has just been terms of — in terms of our own monitoring of our business growth internally that has generated it.
Once the business initiatives that we have taken starts bearing in the growth, we anticipate to move-up further. And like you said, the wage for a better valuation, I think it will — I think it will get going to be over the sooner than you think. The profits will come and as we go-forward, the graph we anticipate to trend upwards, but it will certainly from both a growth perspective and from profit growth.
Saket Kapoor
Yeah. Thank you, sir, for all the answers and hope for further interactions
Salee S Nair
It is a market that has to give us a valuation. I’m sure the market will understand because market is — after all, we’ll understand numbers better than better than us and I just and give us the value that we deserve.
Saket Kapoor
Thank you.
Operator
Ladies and gentlemen, this will be our last question. It’s from the line of Manish Jain from Wealthcare Securities. Please go-ahead.
Saket Kapoor
Yeah, thank you for the opportunity, sir. Sir, what percentage of our business comes through the digital channels and where are we compared to other private banks and what are our future initiatives in this segment, sir?
Salee S Nair
Do the business. It is, I would say very close to zero, right? 2% to 3%. But of course, of course, on the advance side is a — see those are the initiatives that we have taken. On the advancer side, I just mentioned, we have put in-place a business rule engine. So where which is — which has just been the construction of which has just been completed and it is under testing phase.
Where we intend to use data for decisioning, credit decisioning. I think that you will see starting from maybe later part of the quarter or in the second-quarter of the current year, it will go on-stream. So significant — particularly low-value of the below INR15 lakhs I would be significantly using the digital means to onboard and also for positioning purposes — banking purposes of such loans.
So I think that hopefully should significantly reduce the — reduce our own operational cost of managing these accounts. So that process is gone. I think that’s one of — that is where the initiative that I mentioned is aiming that. Everything is very, very low. I don’t want to realize nothing worth speaking about. But as we go by, I think the onboarding of customers would be significantly through the digital channel, both on the liability side And on the asset side. In fact, we are — as I speak, we are completely revamping our onboarding journey on the current account space
Manish
Yeah.
Unidentified Speaker
Transactions as of now it is more than 90%. So we are not — we have not rolled-out any product like pre-approved loans, which is — which is available through digital channels. So thereby the business growth MDSE or mentioned is around 50%, but our customers do use digital channels like banking and other digital and the transactions are now more than 90% of transactions are coming through digital channel.
Manish
And business, you told how much 44%.
Unidentified Speaker
Business is roughly 2% to 30%, business
Salee S Nair
Onboarding the advanced customers, credit customers are largely through legacy means. And our entire initiative is that enough through other material put in-place a large relationship manager post. So that’s a part we are also looking at how we can be ordered — onboarded through various other layers.
Manish
Okay, sir. Okay. Thank you for the elaborate answer and best of luck, sir. Thank you.
Salee S Nair
Thank you.
Operator
Thank you. Thank you. Ladies and gentlemen, that was the last question for today’s conference call. I now hand the conference over to Mr Naya for closing comments.
Salee S Nair
Thank you. It was good to talk to the Group. Of course, not been able to see, but the voices were very clear. And like I said earlier, the FY ’25 has been a year where we have seen — we have tried to break from the past in terms of growth in business numbers, we have partly — or rather more than that, what I mentioned in the last December results call that we will look at double the deposit growth and that has actually happened.
We have more than doubled it. I mentioned 8%. We have crossed 5%. We are at 8.43%. So the overall business number is also I think is below — except that it’s a targe below the market. It’s 3.58%, but FY ’26 we will see that it is aligned to the market or perhaps even better than the market. And our stress quality, the management of our stress is perhaps as good as the best-in the market, 1.25% GNPA, SMA at 2.5% or 2.55%, both combined 3.80% of is perhaps one of the best-in the market.
I think capital adequacy ratio is very good at 32.71% at 71% and finally delivering a net profit of 10.35% and we are — lot of initiatives have been taken to push up both the business levels and the net profit and I’m sure that the FY ’26 numbers we will deliver. We are confident that will be significantly — it will be better than what we have done for FY ’25. And that’s our endeavor. I think towards that a significant amount of initiatives have been taken.
I did mention about verticalization. I did mention about key initiatives and of course, also about how we intend to turn our branches, at least some of them into — in both in terms of appearance and in terms of orientation for business growth. So I think we are fairly confident. I think confident in the sense that the initiative that we have taken is beginning to show some growth.
Green are very, very clearly evident and that gives you the confidence that FY ’26 is going to be significantly better than FY ’25. And like — as I said, initially, FY ’27 is the year that you have to watch out the TNV for. So thank you once again for — for coming and joining us on this call. And I’m sure any other questions that we have, we can also take it separately as well.
Unidentified Speaker
Thank you. You covered everything a couple of points and just to hedaging care. I think that is in terms of our NPA management. So we have traveled lot from a position of INR1,084 crores in 2021, which was 3.44% of our portfolio. Today, we start at INR553, which is half of what we were in 2021.
And similarly, net NPA, if you look at it, this year’s position is INR160 crores, which you are ask against INR335 crores. You second more than 50% reduction in net NBA. So you stood point out of. And thank you very much.
Operator
Thank you. Thank you. On behalf of Tamil Nad Bank Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.
Salee S Nair
Thank you