Tamilnad Mercantile Bank Limited (TMB) is a private sector bank in India that has been facing challenges in achieving earnings growth amidst a economic slowdown. The bank’s performance has been impacted by various factors such as intense competition, rising non-performing assets (NPAs), and sluggish credit growth. However, despite these challenges, TMB has been exploring various strategies to achieve affordable growth and improve its market breadth indicators.
One of the key strategies adopted by TMB is to focus on retail banking, which has been a major driver of growth for the bank. The bank has been expanding its retail loan portfolio, which includes products such as home loans, personal loans, and vehicle loans. TMB has also been increasing its presence in the micro, small, and medium enterprises (MSME) segment, which has been a growth area for the bank.
Another strategy adopted by TMB is to leverage technology to improve its operational efficiency and reduce costs. The bank has been investing in digital channels such as mobile banking, internet banking, and ATMs to enhance customer convenience and reduce transaction costs. TMB has also been implementing various cost-saving measures such as reducing its branch network and optimizing its staff strength.
In terms of market breadth indicators, TMB has been performing relatively well. The bank’s net interest margin (NIM) has been improving, which is a key indicator of a bank’s profitability. TMB’s NIM has increased from 3.33% in FY19 to 3.51% in FY20, indicating a improvement in the bank’s ability to manage its interest rates and maintain its profitability.
However, despite these positive trends, TMB still faces challenges in achieving earnings growth. The bank’s return on assets (ROA) and return on equity (ROE) have been under pressure, which are key indicators of a bank’s profitability. TMB’s ROA has declined from 1.23% in FY19 to 1.17% in FY20, while its ROE has declined from 14.15% to 12.51% during the same period.
To achieve affordable growth, TMB needs to focus on improving its asset quality, reducing its NPAs, and increasing its provisioning coverage ratio. The bank also needs to continue to invest in technology and digital channels to improve its operational efficiency and reduce costs. Additionally, TMB needs to focus on expanding its retail loan portfolio and increasing its presence in the MSME segment, which has been a growth area for the bank. With a well-planned strategy and a focus on improving its market breadth indicators, TMB can achieve earnings growth despite the economic slowdown.