Operator: Ladies and gentlemen, good day, and welcome to the Q2 FY 2027 Earning Conference call hosted by Tamilnad Mercantile Bank Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectation of the company as on date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant line will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation conclude.
Operator: Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. On the call today, we have the following management representatives: Mr. Salee S Nair, Managing Director; Mr. Vincent Menachery Devassy, Executive Director; Mr. Sanjoy Kumar Goel, Chief Financial Officer. I now hand the conference over to Mr. Salil S. Nair, Managing Director from Tamilnad Mercantile Bank Limited. Thank you, and over to you, sir.
Salee S Nair: Thank you. Thank you very much, and thanks for attending this con call from the Tamilnad Mercantile Bank. I am sure most of you would have already seen our results on the website and on the exchanges. The quarterly performance has been as anticipated. We have been maintaining the trend of growth that we delivered last quarter. We have actually exceeded that, and this is something that we have been doing it quarter after quarter for the past seven quarters. I think this is the eighth quarter where we have exceeded our previous performance. To delve into some of these highlights, very clearly the growth has accelerated and the profit is at record level.
Salee S Nair: When we look at the business growth itself, the total business grew 27.25% year on year, which is almost three times our own 10-year CAGR of 9.41%. This CAGR is also moving up on the basis of the rising growth. This growth is highest year-on-year growth in the last 18 years. That is something that we are fairly proud of. It is also 8% faster than the industry. The delta today in terms of growth is 8% over the industry's growth that TMB has delivered. This growth has driven a strong net profit, the highest ever, INR 451 crores, highest-ever net profit. That net profit has come out of the core business growth.
Salee S Nair: These are not on account of exceptions, these are largely driven by the core business, the core by a very strong net interest income. Let me also say that the strength that we are adding to the balance sheet in terms of other measures, one of them we have taken is looking forward into the ECL norms that will come on 1 April 2027, we have, in anticipation, provided fully SMA 1 and SMA 2 as per ECL norms. I think that is something that we have done this quarter. If you recall, in Q1 of the current year, FY27, we had also provided fully for the stressed NFB facilities. That was last quarter. This quarter, SMA 1 and SMA 2, we have fully provided as per ECL norms. Of course, NPA, the gross and net continues to decline.
Salee S Nair: The net NPA is at 0.14%. The capital adequacy is at 32.39%. The balance sheet has also moved up quite sharply by 24.49% year on year. This has resulted in the overall growth and the profits, has resulted in an ROE of 60.92%. Quarterly earning per share is at INR 28.49, and the shareholder sum is today 12.53 of the balance sheet. Just to give a little more color on the numbers itself, the total business stands at INR 1,32,237 crores, is up 27.25%, and contributed by deposit growing at 25.49% as it stands today, which stands at INR 69,546 crores and advances up 29.32%, as standing at INR 60,691 crores. CASA grew over 16.26, RAM at 28.96. On the earning side, as I said, the profit has been delivered on a strong net interest income. The net interest income for the quarter stands at INR 807 crores, up INR 45.17 crores.
Salee S Nair: The operating profit is INR 642 crores. Operating profit after expenses, INR 642 crores, up 41.80%. As I said earlier, the net profit is record, the highest ever this bank has clocked at INR 451 crores, up 42.09% year on year. ROA, the return on assets stands at 2.18%. ROE 16.92%. That is where we stand. Of course, when you look at the cost to income, it is 38.28%. That is where it stands as on 30 September. The unsecured exposure is a bare 20 basis points. Our RAM focus continues. It stands at 94.33%. The net interest margin is year on year up 36 basis, stands at 4.19%. Sequentially, it stands at, we have lost 10 basis. It was 4.29% and I did explain why it was 4.29% last quarter in the last con call. Profit per employee stands at almost INR 35 lakhs. That is up 36.45%.
Salee S Nair: Gross NPA 0.61% and net NPA is 0.14%. The credit cost is at 9 basis points, 0.09%, and the slippage is again 6 basis points. The PCR, on book PCR is 77.49%, and the overall PCR is at 96.61%. SMA 012, I repeat, it is zero included, SMA 012 is at 1.67%, which is that if you look at your NPA of 0.61% and SMA of 1.67%, your portfolio at risk one day, today, on 30 September, was at 2.28%. As I said earlier, the stress NFB we have provided 100%, and SMA 1 and 2 we have also provided 100% as per the ECL norms. Just to run through some of the numbers, CASA at 16.26% is the growth. Term deposit, the total term deposit growth of 25.49% has been driven by the term deposit, which stands at almost 29%.
Salee S Nair: If you look at the number itself, I think the non-callable deposits share in the incremental term deposit, the incremental term deposit for the H1 stands at INR 7,570 crores, 40.62% of that came in the form of non-callable deposits. As you are aware, non-callable deposits are deposits which cannot be paid before the maturity. So there is no prepayment of that. From that perspective, these deposits makes our resource security that much more stronger. FCNR(B), we did about $51.94 million. Not something that we can write home about. Overall, the FCNR(B) deposit base, deposit growth has been 47.14%. So FCNR(B) is not one of the better stories that we want to put on the table. It is just about $51.94 million. The advances, 29.32% riding on the RAM. If you look at the MSME, as I promised, has inched up and today stands at 23.62%.
Salee S Nair: We also have, I think there is a lot of talk going on the gold loan portfolio. The gold loan portfolio, we have put out our sensitivity on it. At 20%, 3.13% of our gold loan will be above the market. It is just at 3.13%. The portfolio LTV stands at 62.35%. Overall, the portfolio is at about 48%, almost stable. It was about 47% something earlier, it is about 48% now. Unsecured exposure remains minimal at 20 basis points. When I get into some of the ratios, I will just take you through some of the ratios. First slippage, I just mentioned 6 basis. Before I come to the ratios, let me also give you some color on the expected credit loss. We have done a calculation of the impact as of 30 September 2026, that comes to about INR 384 crores.
Salee S Nair: The new norms on expected credit loss would be INR 385 crores, and I think if you check into the slide 29, we have given a color of how we intend to tackle it. Our provisions done this quarter, last quarter, and the existing contingency provision together today covers almost 80% of that at INR 304.24 crores. On the ratios, cost of deposit has moved up. Yes, one of the reasons is that it is moving our share of term deposit. As you can see, the CASA moved up only 16.26%, where our term deposit actually grew close to 29%. So it is having an impact on the cost of deposits at 5.85%.
Salee S Nair: This was anticipated, and we have tweaked our advances portfolio to cover for this increase because focus has been more on the source security for our growth and we are anticipating that we did tweak the advances and that also shows up in the yield on advances, which has moved up to 10.32% from 10.10% earlier. Cost of funds is at 5.93%. We have picked up almost INR 1,000 crores of refinance during the quarter at 7.5%. It is also pushing up the cost of funds. Consequently, the NIM sequentially has come down about 10 bps. It is still on a year-on-year basis, it is still significantly 36 bps up. Credit cost, like I said, is just 9 bps.
Operator: Sorry to interrupt. Just to confirm, are the management there? Because we are not able to hear you. Team, just to confirm, are you still there? Because we are not able to hear you. Ladies and gentlemen, I request you to please stay connected while we reconnect to the management. Thank you. Ladies and gentlemen, we have management connected with us. Over to you, team.
Salee S Nair: Yeah. Sorry, I think we got lost very strange in these kinds of robust network. Just to take you back, I am sure most of you would have heard me crossing out some of the numbers. I will take you through back once again from the expected credit loss. Our calculation show that the expected credit loss for the bank is INR 385 crores. Like I said, in the last quarter, we did provide fully 100% for the NFB facilities which are under stress. This quarter we have provided 100% for SMA 1 and 2 as per ECL norms. So the total upfront provision that we have done for the ECL is INR 54.24 crores and along with the existing contingency provision available of INR 250 crores, we have a provision available of INR 300.24 crores against the INR 385 crores that is required to cover the expected credit loss.
Salee S Nair: That is almost a provision of almost 80%. I was also telling about the cost of deposit, which has moved up 5.68% to 5.85%. That is anticipated. When you look at your term deposit moving up almost 29% and the CASA moving up at a slower pace of 16.26%, the cost of deposit is anticipated to go up. We did, like I said, anticipate, and we tweaked our advances portfolio to guard against that. That is also having an impact on the advances portfolio, where it has moved up from 10.10% to 10.32%. Cost of funds at 5.93%. We did pick up some refinance in the quarter from SIDBI at about 7% to 7.5% and that slightly pushed it up. The NIM consequently is at 4.19%, is up 36 bps on a year-on-year basis.
Salee S Nair: But sequentially, as the term deposit portfolio is improving, it has actually gone down about 10 basis points. Also, our credit cost is at nine basis, capital adequacy at 32.39 basis, and cost to income ratio, like I said, has consistently been moving down, trending down and stands at 38.28%. PCR at 77.49%, that is the on-book PCR. I can also tell you that now our leverage and NSFR, LCR, et cetera, are on a good footing. Our leverage ratio against what is required to be done at 3.50%, our leverage ratio stands at 11.99%. LCR is at, one second. Is at 139.43% and NSFR is at 146.15%.
Salee S Nair: We have also given you some color on how the CD ratio can move forward, to what extent we have cushion left, and that is also there in the presentation if you refer, page number 33, the CD ratio that is possible for us given the fact that our net worth today has 12.53% contribution to the balance sheet. We can go up to a CD ratio of 98%, and today the CD ratio stands at just 87.27%, which is better than what we did last quarter. The profit per employee has gone up 35% to INR 35 lakhs. Sorry. Profit per employee goes up to INR 35 lakhs. Sorry. It is not crores, it is lakhs. But business per employee is at INR 25 crores. We did open nine branches in the H1, and we are committed to open 60 and process is on for the other branches to be opened.
Salee S Nair: Year on year, we did open about 37 branches, and 15 of these branches was opened outside the state of Tamil Nadu. When we end the year, 60 branches, we hope to open 20 plus branches outside the state of Tamil Nadu. So I think we have also given you some color of the kind of structural changes we are making in the presentation. I think you can go through that and if there are other questions, we are here to answer that. So over to you guys. Thank you.
Operator: Thank you. Team, shall we begin with the question and answer session?
Salee S Nair: Yeah, please.
Operator: Thank you so much. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question come from the line of Darshan Deora with Indvest Group. Please go ahead.
Darshan Deora: Yeah. Thank you for the opportunity to ask this question. Firstly, congratulations to the entire TMB team on a great set of results. Every quarter, you guys have been hitting out of the park and congratulations for another quarter where you have hit it out of the park. My first question was on the split of the gold loans. Can you give the breakup between agri and retails?
Salee S Nair: Agri and retail, the total number is 29,280. Do you need a breakup?
Darshan Deora: Yes.
Salee S Nair: Agri is INR 22,000.
Darshan Deora: Yeah.
Salee S Nair: The other one is INR 6,000.
Darshan Deora: Okay. So it is around INR 22,700 you said, right?
Salee S Nair: Yeah. The other one, the retail is at INR 6,084.
Darshan Deora: Okay. The second question was, what percentage of our loan book would be linked to the repo rate, and when do we do the reset? Suppose the repo rates get increased, is it immediate or is it a lag of a quarter?
Salee S Nair: It is not immediate. 52% of our advances portfolio is repo linked, and the repo pricing gets changed at the reset date.
Darshan Deora: Okay. But you said 52% or 62%?
Salee S Nair: 52%.
Darshan Deora: 52. Okay, got it.
Salee S Nair: Next quarter, I think all the entire book will be reset.
Darshan Deora: Okay. Just to give the breakup, you said 52% is repo. What would be fixed rate? What would be the MCLR?
Salee S Nair: The fixed rate would be about 4.85%. Your MCLR would be the balance. Just one second, I will give you. Where is it? Do you have it? Around 44%.
Darshan Deora: 44%. Okay.
Salee S Nair: Where is it? Yeah. We also have a small portion of treasury linked. So, 52.
Darshan Deora: Yeah.
Salee S Nair: 23 and five.
Darshan Deora: Okay, got it.
Salee S Nair: 4.85 and the rest are matching up with the treasury link. Yeah.
Darshan Deora: Got it. You said the reset is not immediate. It happens as per the contractual reset date.
Salee S Nair: Yes.
Darshan Deora: Does that range from, is it usually on a six-monthly basis or quarterly basis, annual basis, typically?
Salee S Nair: It is quarterly. Quarterly.
Darshan Deora: Quarterly basis. Got it. One last question. There is a slight uptick in terms of our unsecured portfolio. What type of loan is it? Is it like a credit card type loan or is it unsecured personal loan?
Salee S Nair: No, it is neither credit card nor we have given a loan to Kerala State Electricity Board. Government.
Darshan Deora: Okay. But it is unsecured loan. Okay.
Salee S Nair: Yes, it is against the cash flows.
Darshan Deora: Got it. Thank you. That is all from my side. Congratulations on the great set of numbers.
Salee S Nair: Thank you.
Darshan Deora: Yeah.
Operator: Thank you. Our next question comes from the line of Varun Dubey with Share India Securities. Please go ahead.
Varun Dubey: Good evening, sir. Once again, congratulations on strong set of numbers from your side. I mean, quarter on quarter, your company has been performing very well. But I remember, sir, last quarter when the good performance continued, your company had actually gone ahead and raised its guidance. This time should we expect a better guidance from your side because you have not said anything on the FY27 guidance. What would be the advances growth, the overall business growth and the deposit growth guidance for FY27? Would you like to revise it for that?
Salee S Nair: Varun. Okay. What do you want us to do? I think we can, from whatever we said the last time, maybe just to keep you happy, we can increase the guidance by 1%.
Varun Dubey: Okay. Because you were-
Salee S Nair: Let me tell you, in the H2, we are hoping to see the CASA growth continuing at the existing level, perhaps a tad bit higher. We are looking at anticipating a 17% kind of growth. But the deposits, we did give a guidance of 18% plus. Right? If you remember, if you recall last time, we did give an 18% plus guidance, and I think now we are safely, we can say this will be 20% plus. The plus, how much of that would be the plus, how much that amounts to is something that we will see, but it will be 20% plus. Similarly, on the advances growth, we are anticipating 22% plus. Again, the plus is what will interest you, and that is what we will see how much of a plus we can achieve. The numbers are the minimum.
Varun Dubey: Okay, sir. Got it, sir. No issue. I am sure that your company will achieve better than what you said because since last two quarters, that is what the bank has been performing. One more thing I just wanted to understand because your
Salee S Nair: Last two quarters. We are executing from the last seven quarters.
Varun Dubey: Yes, sir. Right, sir. I just wanted to understand one thing because your cost-to-income ratio has been below 40%. I mean, is this because your branch opening target, that 60% you had, has not been yet met and in the H2 you would see the number of branches coming and that would actually raise your overall cost-to-income ratio?
Salee S Nair: Yes.
Varun Dubey: How do you see that?
Salee S Nair: I think you are right in a way that your 38% plus cost to income is something that we will not be able to defend going forward. It will move up because of, you caught on to the right point here that there are branches to be opened and there is some investment happening on the IT space as well. So it will move up, but we did mention last quarter that we will be below 45%. I think we will be well below 45%. Maybe there also we can reduce the upper cap by 1%. We will be well below 44%.
Varun Dubey: Okay, sir. Sir, one more question, just wanted to understand. In this FCNR deposit, what is the rate that your bank has offered and what is the current deposit rate after the repo rate hike? Has there been any pass on to the customer?
Salee S Nair: Yes, I think the repo rate. There is nothing that we do. The repo moves up 25 basis points, it moves up to 5.5. The entire portfolio moves up to 5.5 on the reset date. Right? So the underlying benchmark moves up to 5.5. That 5.5 is actually implemented on the reset date, which varies for each customer as per the contract. So over a period of three months, the benchmark gets repriced to 5.5 from 5.25. So that is an automatic process. There is nothing that we do here.
Varun Dubey: FCNR deposit.
[Company Representative] (Tamilnad Mercantile Bank): He is asking for deposit rate.
Varun Dubey: FCNR deposit.
Salee S Nair: Sorry, Varun, what were you asking?
Varun Dubey: The rate of FCNR deposit what the bank had actually offered.
Salee S Nair: FCNR deposits, we did make close to $52 million, $51 million plus. The rate there was because it was aligned to the kind of bulk deposit rate that we were gathering is in that range. But subsequently, we have dropped the rates and it is back. I think it is back to 4.25% or something. What is the rate? FCNR rate today? One year is 4.25%, right? Yes, Varun, I will get you the exact number for the rate.
Varun Dubey: Okay.
Salee S Nair: But the rate has come.
Varun Dubey: Very well, sir.
Salee S Nair: The usual. Okay.
Varun Dubey: Okay, sir. Will do. Sir, thank you, sir, and congratulations once again, and best of luck in the coming quarter.
Salee S Nair: Thank you.
Operator: Thank you. Thank you so much. Our next question comes from the line of Nandini Kuntela with Blue Stripes. Please go ahead.
Nandini Kuntla: Thank you for giving me this opportunity. Congratulations, sir, for the wonderful number. Here are my questions.
Salee S Nair: Thank you.
Nandini Kuntla: First one, will the bank maintain the similar growth percentage over three to five years?
Salee S Nair: Similar growth.
Nandini Kuntla: My second question.
Salee S Nair: Sorry, what was the first question? I did not quite get it. You said similar what?
Nandini Kuntla: First question was, will the bank maintain the similar growth percentage over 3 to 5 years?
Salee S Nair: Okay.
Nandini Kuntla: My second question is because of increasing in price of crude oil, does it affect our bank in future possible?
Salee S Nair: Well, whether we will maintain the current growth rate. What we are looking for is not a 20%, 25%, 30% growth. What we are looking for is to exceed the industry's growth by a certain percentage. Our own ambition is to exceed the rate at which the industry is growing and to exceed that by 4% to 5%. That is our long-term plan. I think that's where the components of the bricks are being put in place. It so happened that this quarter we have actually exceeded it by 8%. But going forward, on a sustainable path, I think the next 3 to 5 years, that's the kind of number we are looking. So it will not be 15%, it will not be 20%. If the industry is growing at x%, we will be growing at x plus 4% to 5%. So that is the answer to your first question.
Salee S Nair: Second one on the oil. As yet we are anticipating a bit of it, but so far we have not been impacted by the oil prices as such. Neither in our export credit portfolio nor in our existing MSME portfolio. We have not seen the impacts as yet.
Nandini Kuntla: Okay, sir. Thank you.
Salee S Nair: Thank you.
Operator: Thank you. Next question comes from the line of Parth Gudka with 360 ONE Capital. Please go ahead.
Parth Gutka: Yeah. Hi, sir. Thanks a lot for the opportunity. My first question is, your yield on advances has gone up by 22 bps on a quarter-on-quarter basis. What has led to
Salee S Nair: Yeah, yield on advances has gone up. Yes. Tell me.
Parth Gutka: What has led to the sharp 22 bps increase on yield on advances on a quarter-on-quarter basis?
Salee S Nair: Let me also tell you that when we were looking at, we are still a bank not large enough, and we are in a position to finely manage both sides of the balance sheet, assets and liabilities. Right? When the growth started picking up and we were focusing on the resource security, which is generating enough deposit to finance that growth. We realized that we have to move in between CASA and the term deposit, when we start focusing as much on the term deposit, obviously your cost of funds is likely to go up, and it has actually moved up. If you see quarter on quarter, it has moved up. To offset that and to maintain the NIM at the level that we are comfortable with, we had to tweak the portfolio.
Salee S Nair: Some of them we have been tweaking a bit of. The gold loan portfolio we have tweaked it a few basis point up. We have also tweaked our
Parth Gutka: maximum wherever possible
Salee S Nair: in line with the market a few basis up. We have been consciously trying to see how we can get that extra bit from the advances. That is paying off. If you look at it, the yield has actually moved up to 10.32%. This is a conscious decision to take care of the liability side where the churn is moving towards the term deposits. The mix is moving towards the term deposits. Yeah.
Parth Gutka: Okay, fine, sir. My second question is on the cost of funds again. It has again gone up by 23 basis point on a quarter-on-quarter basis, and you just alluded to the fact that
Salee S Nair: Apart from the fact that the terms of the mix is moving in terms of term deposit. Incidentally, the term deposit for the bank went up almost 29% on a year-on-year basis, where the CASA would have pulled about. The growth was being maintained what we were having earlier. It was about 16% to 16.5%, 16.26%. That is having an impact on the cost of deposits, and you can see that having an impact on the cost of advances. Sorry, cost of funds as well. Apart from the deposit, we were also been looking at some amount of refinance, which is coming at about 7.5%. That pushed up the cost of funds a little.
Parth Gutka: Right. Net-net, should we expect NIMs to sustain around similar levels or anywhere between 4.1% to 4.2% rather than at a higher range of 4.3%?
Salee S Nair: If you are saying 4.1% as the first number, I think possibly we can look at that. I would say 4.10% plus or minus five bps is what we are looking for the rest of the year.
Parth Gutka: Sure, sir. Thanks a lot, sir. My last question is within the gold loan, what is the average ticket size that the bank operates at? Are we finding any sort of concerns within the asset quality within your gold loan portfolio?
Salee S Nair: Yeah. The average ticket size is
[Company Representative] (Tamilnad Mercantile Bank): INR 2.66 lakhs.
Salee S Nair: INR 2.66 lakhs. So it is fairly a widespread. So it is, I think, 12 lakh plus of customers we have, right? It is quite widely spread. The ticket size is about 2.6. If you are looking at the stress side of it, is something that is engaging the attention of the bank on a daily basis. We have put in place systems which will track each gold loan from an LTV perspective. When we talk of LTV, we are talking about principal plus interest accrued till that date. So on a daily basis, sir, this is something that we do look at and there is a team that tracks it. Currently, when we have done the sensitivity for the recent, no. For this presentation, if you can, page number 14 will give you that.
Salee S Nair: We have given that the price reversal of up to 20% is something that more or less the portfolio can sustain. At 3.3% is if there is a crash in gold prices of 20%, the share of the gold loan that will be above the market is just 3%, sir, a little over 3%. So it is a fairly resilient portfolio. The portfolio LTV is at 62.35%. In September 2026, your SMA plus NPA together, that is per portfolio at this one day, is just INR 28 crores. So this is a portfolio that we are managing on a dynamic basis because we are aware of the volatility in the gold prices. That is something that we are aligned to that and it is being managed on a daily basis.
Parth Gutka: Sure, sir. Thank you.
Operator: Thank you. Next question comes from the line of Jyoti Khatri with Ambit Wealth. Please go ahead.
Jyoti Khatri: Yeah. Thanks for taking my questions. A couple of things. I hope I am audible. Firstly, I just missed on to your margin outlook, which you mentioned.
Operator: I am sorry to interrupt you, Jyoti, but there is a lot of background noise coming from your end.
Salee S Nair: Jyoti, anyway, I will respond to your first question, what I just mentioned to the other
Jyoti Khatri: I will not.
Salee S Nair: analyst. That we would be looking at, yes, our focus on resource security saw the cost of deposit moving up a bit, but we are tweaking our advances also in a similar fashion. We did end up the quarter with a 4.19% net interest margin, but for the rest of the H2 going forward, we are anticipating. We did give a guidance of 4%, but we believe today that perhaps 4.10% plus or minus 5 bps is something that we will be able to defend for the next H2.
Jyoti Khatri: Okay, great.
Salee S Nair: Yeah, Jyoti.
Operator: Participant has left the queue. We can move to the next participant. Our next question comes from the line of Deepak Jain, individual investor. Please go ahead.
Deepak Jain: Hello, am I audible?
Salee S Nair: Yeah.
Deepak Jain: Thank you for the opportunity, sir, and congratulations for the Q2 results. It is one of the greatest results in our history. Again, we proved that bank's ability to generate the transfer. I will come to my questions. My first question is, how much percentage is the floating loan in our loan book, sir?
Salee S Nair: Floating loan in our loan book would be something like 95%.
Deepak Jain: Okay.
Salee S Nair: The floating loan book has two components, which is a repo-linked loan and an MCLR-linked loan. 52% of that is repo-linked, 43% will be MCLR-linked. We have approximately about 130 odd treasury-linked loan, and the balance will be fixed rate, which is part of it is staff loan and part of it is loan against deposits.
Deepak Jain: Thank you. Thank you, sir, for the detailed explanation. My second question is, the bank facing current dispute is small portion of the ownership. In that case, is affecting the bank giving any bonus or split or any equity increase further or that will not affect if you decided to give bonus or split in near future or anywhere in the future, sir?
Salee S Nair: No, I think, we have given a bonus earlier. The only challenge before us at that point of time that we gave a bonus to a certain disputed categories of shares as well. So we never looked at the color of the disputed category shares the bonus was issued to, for example, if it was under ED's attachment, we actually gave the bonus shares also to the ED. Right. So I don't think that is going to come in the way of split of shares or in any manner. But having said that, I think we would like to look at that after, I hope you know that the show-cause notice one case has been, the appellate tribunal has come out with the order on 9 July.
Salee S Nair: And if you check into our slide number 42, we have given a disclosure on that now we have filed an application before the RBI to regularize the transfer of shares. The same is under consideration. Going by what RBI says, obviously, whatever the regulator says, we will be 100% compliant of that. That is also true for whatever call that they take on these shares, we will abide by that. We are awaiting the RBI's response.
Deepak Jain: Sure, sir. Thank you. My another question is, what is the insurance commission income for the bank, sir, in this quarter?
Salee S Nair: Insurance commission income, INR 26 crores. In the 6 months. 6 months it is not 26. How much is it? Around INR 9 crores. Insurance per se is about INR 9 crores in the H1. H1, right? It comes with a lag always. That is where it is. Having said that, I think this is something that we are zeroed in on to improve. You will see a substantial increase happening in this. Yeah.
Deepak Jain: Okay. My final question is, in past we have did very much technology CapEx. How this yielding us now? What is the feedback? What is the output for now? That is it from my side, sir.
Salee S Nair: Yeah. I think the numbers, you are in. Technology and the automation of the processes has ensured that productivity increase. And it is that that is really driving this growth that you are seeing on the table. Thank you. Next question come from the line of Sarvesh Gupta with Maximal Capital. Please go ahead.
Sarvesh Gupta: Yeah. Good evening, sir, and congratulations on a very good set of numbers. So sir, first question on the NIM side. Basically now you will have two opposing forces. One is because you are growing at 20% plus, so you will have to go for more term deposits because CASA probably cannot grow beyond mid-teens.
Salee S Nair: Yeah
Sarvesh Gupta: The mix would be changed unfavorably in terms of term deposit, which is what we have seen. So deposit pricing overall will go up. But at the same time, there are positives also. First of all, your rate increase of 25 basis points and probably more going forward. And then also because banks are flush with FCNR(B) deposits, and they may not be looking to increase the deposit rates quickly enough. Given these two opposing forces, do you see a decline in your NIM going forward? Because you are talking about 4.1%, which is, I think, already lower by 10 basis points compared to this quarter, which was lower by 10 basis points from previous quarter.
Salee S Nair: Let me tell you how we.
Sarvesh Gupta: Yes.
Salee S Nair: Whenever we talk of a number, right, and if you look at the behavior of our numbers in the past against the guidance, the number is always the minimum. I think we will start to benefit from whatever you have stated. One, you have stated that the term deposits rate, at least in the short term, is not likely to move up because given the FCNR(B) funds that we have. The tweaking that we have done in the portfolio has actually benefited us in Q2. That will continue. The other aspect is that when we had a bit of a surplus, the surplus entered. If you look at our balance sheet, we had a little over 20% in the investment portfolio that has moved up close to 22%.
Salee S Nair: That extra 2% that we had entered into the investment, which carries a much lower yield, is somewhere around 7% as compared to about 10% plus or 10.3% with advances. So it is a 3% kind of number. The surplus has also cost us in terms of NIM. So when I said 4.10, I had actually said 4% in Q2. That is a NIM that we maintained. Now I am saying it will be 4.10. It is always a minimum and we only play on the plus, the extra on that.
Sarvesh Gupta: Okay. Secondly, sir, on the term deposits that we are raising, what is the mix of the stock as well as the amount that we have raised in terms of bulk deposits, which is coming at a higher rate versus, let us say, a usual retail term deposit?
Salee S Nair: Bulk deposit, do we have the numbers? What I do have the numbers data there and which we have put in is from a resource security perspective, because bulk or otherwise, the rate of interest gets captured in the 5.85% that we did mention as the cost of deposit. But from a resource security perspective, we are also looking more and more at the non-callable deposits. Today in the incremental term deposit, non-callable is 40.62%. So which means non-callable or callable deposit. See, even term deposits can be prepaid. If they ask for a prepayment, we will be obliged to give. From that perspective, it is volatile. CASA is really highly volatile, but even term deposit has a runoff factor. But non-callable by the very nature has no prepayment attached to it, which means it will be only prepaid on maturity.
Salee S Nair: So that share in the overall term deposit is going up. But on the bulk, you have the bulk number?
[Company Representative] (Tamilnad Mercantile Bank): 19.9.
Salee S Nair: 19?
[Company Representative] (Tamilnad Mercantile Bank): On the total deposit, 19.9%.
Salee S Nair: 19% is the bulk deposit in the overall total term deposit.
Sarvesh Gupta: In this INR 7,570, how much is the bulk deposit raised?
Salee S Nair: As I mentioned, 19% on all the total deposits. Total deposit about INR 69,000 crore. You have this one? INR 7,570 million. What is the bulk deposit component?
[Company Representative] (Tamilnad Mercantile Bank): Yeah.
Salee S Nair: We will get back to you on that. Okay.
Sarvesh Gupta: Okay. Finally, one question on the gold loan. Because we have seen some softening of gold prices.
Salee S Nair: Yes.
Sarvesh Gupta: At the industry level, from a risk mitigation point of view, are you seeing players trying to lower their LTVs to sort of safeguard their incremental book going forward? Because if there is further softening in the prices, then the risk portfolio keeps increasing. At the industry level, how are you seeing people behaving in terms of LTVs? Hello?
Operator: Hi, management. Just to confirm, are you still there? Ladies and gentlemen, I request you to please stay connected while we reconnect to the management. Thank you. Ladies and gentlemen, we have management reconnected. Over to you, team.
Salee S Nair: Yeah, I was just responding on the gold loans. I think this is something that the industry is worried and certainly we have been proactive from the TMB side. We have put in place systems that can track the LTV at the individual level on a daily basis. We have 12 lakh plus customers, and at the individual level, if I say it can track, you can imagine the kind of systems we have put in place. The tracking is on the principal plus interest accrued up to date. So that's the kind of tracking we do. From that perspective, our portfolio LTV is 62.35%, and our portfolio currently can tackle a price reduction almost close to 20%. So that is a kind of fairly resilient portfolio.
Salee S Nair: But you are right in a way that the volatility in the gold prices, the commodity risk associated with the gold, the market is watching, and it has reached $4,000 an ounce yesterday and it slightly come back today. Obviously, the market would have to drop the per gram rate in line with the prices that are moving in the market. In whichever direction it's moving, the prices will have to be appropriately tweaked in that direction. Currently, the market prices are going down. I'm sure the industry will mark the prices per gram rate down in tune with that. We have already done that. I think we have already in the last few days, we have reduced it by as much as INR 800. This is something that we will It's a dynamic thing.
Salee S Nair: The point is to ensure that the gold loan portfolio stays resilient, robust. Let me also tell you that on 30 September, our gold loan portfolio at risk one day is just INR 28 crore, is 0.10%. I'm talking about SMA 1 and 2 together. SMA 0, 2, and NPA together. Hello?
Operator: Thank you. The next question comes from the line of Varun Dubey with Share India Securities. Please go ahead.
Varun Dubey: Thank you, sir, once again for taking my question. Just wanted to understand a few things, sir. You explained about the gold loan prices impacting the overall gold business, sir. But what about the impact of drought? Because states like Karnataka, Andhra Pradesh, Maharashtra, they have declared drought. What sense are you making? If any agro gold loan book will get impacted, if you can throw some light on that.
Salee S Nair: Yeah. I think the drought can have an impact. That is why I said, that we have put in place a system to track gold loans on a daily basis, on an individual basis.
Varun Dubey: Of course.
Salee S Nair: As well, and on account basis as well. We have also, apart from that, geared up asset resolution teams in our regions. There are 13 regions of us to take counteraction in case at any level the cushion gets reduced to 10%, which is the LTV, which is the principal plus interest, which is the LTV on the day touches about 90% of the market value on that day, margin call. We are also putting in place these asset teams, apart from the margin calls, even looking at, what is that call center you are making? Agentic AI.
Varun Dubey: Agentic AI.
Salee S Nair: Agentic AI call center for margin calls. Things are, I think this is a portfolio that we are managing dynamically with a view that any price drop doesn't hit us or hit us in any way, whether it is on the risk side or on the commodity risk side, it doesn't hit us. We are geared up for that.
Varun Dubey: Okay, sir. But sir, it's not impacting the overall demand, right? I mean, just drought condition.
Salee S Nair: Demand, I think continues to be resilient. The demand continues to be there.
Varun Dubey: Okay. Okay, sir. Sir, one more thing. Just wanted to understand, what would be the IRDAI insurance norms impact on your overall ROA? Have you made any assessment, sir?
Salee S Nair: Sorry, come again.
Varun Dubey: The IRDAI new insurance norms impact on your overall PBT level or ROA. Have you done any assessment on this?
Salee S Nair: Well, let me also tell you that this is an income stream that is slowly picking up. The first six months, our share from the insurance is just INR 9 crore.
Varun Dubey: Okay.
Salee S Nair: Our commission that we earn from the distribution of insurance product, Ashok, is INR 9 crore. What is going to be the IRDAI impact right now?
[Company Representative] (Tamilnad Mercantile Bank): We will have only 20% impact, sir, because we are not more dependent on that.
[Company Representative] (Tamilnad Mercantile Bank): 20% reduction is there, but our incremental business will take care of it. We are already growing at
Salee S Nair: The impact is approximately 20%, which would be more than made up from incremental business. As it is, the number is fairly small at INR 9 crore.
Varun Dubey: Okay. Under INR 30 crores.
Salee S Nair: Right.
Operator: Thank you. The next question comes from the line of Parth Gudka with 360 ONE Capital. Please go ahead.
Parth Gutka: Yeah. Hi, sir. So sir, on the disputed share, you mentioned that you have made an application to the Reserve Bank.
Salee S Nair: Yeah.
Parth Gutka: You are awaiting their response.
Salee S Nair: Yeah.
Parth Gutka: So, for example, the Reserve Bank replies positively. Will that be the final verdict, or will we still have to go to other regulatory authorities to get their approval or get their clearances?
Salee S Nair: Let me tell you on the show cause notice itself. This order came out on 9 July. Right?
Salee S Nair: If it has to be appealed against, you have a 60-day window. Right. In that 60-day window, if you have an issue with the order, it has to be appealed. The bank has not gone for an appeal. Let me also tell you that ED also has not gone for an appeal. Okay, so within the 60-day window, nobody has appealed so far. That appeal time got over by the ninth, I think sometime mid of September. But again, with the High Court intervention, you can go for an appeal. You have another 60 days to go for an appeal, right?
Parth Gutka: Okay.
Salee S Nair: So far, neither ED nor the bank have gone for an appeal. The case rests there. That means the appellate order, no appeal, it stands. Okay. Now, having said that, on the regularization, because this is a FEMA issue that is involved, the regularization is only and only with the Reserve Bank of India, and it need not be referred to any other regulatory or non-regulatory or a judicial agency. It rests only with the Reserve Bank of India.
Parth Gutka: Okay. Fair enough, sir.
Salee S Nair: It has been. It is with Reserve Bank of India, and they will take a call.
Parth Gutka: Okay. Fair enough.
Salee S Nair: I think that we will abide by that call.
Parth Gutka: Sure, sir. Thanks a lot, sir.
Operator: Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for the closing remarks. Thank you. I now hand over to you.
Salee S Nair: Yeah, thank you, and thanks for participation in this concall, this investors concall. As I said that this bank is in a transformation mode. We have brought in a lot of structural changes on data side, on the business process automation, on the IT side, all aimed at releasing the productivity into our system. That is getting reflected in the numbers. So we have delivered numbers that are quarter after quarter better than the previous quarter and our own guidance. We will continue to strive in investing in such productivity gains. As I said, what we have delivered in Q2 is the highest net profit that we have ever delivered, and it is also the highest growth in the last 18 years. We are committed to, as much as possible, sustained efforts.
Salee S Nair: Like I said earlier, it is not a 25% or a 30% growth that we are looking at, or a 20% growth or a 15% growth even. What we are trying to do is to grow faster than the industry. This year, this quarter, we did that at 8%. The delta was 8% faster. What we are looking on a sustainable long term is 4% to 5%. We want to grow faster than the industry. So thank you very much for attending this call. Like I said, we are committed to a profitable bank. We are committed to a robust bank. We are committed to a bank that delivers on quality, both in terms of how our advances are doing and also in terms of our own customer service. Thank you very much.
Operator: Thank you, sir. Ladies and gentlemen, on behalf of Tamilnad Mercantile Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.
Salee S Nair: Okay. Yeah. Thank you. Okay.
Operator: Thank you, sir.
