The 90-year-old Tamilnad Mercantile Bank has reported 25 per cent growth in net profit, at Rs 313 crore, in 2011-12, and set a target of Rs 500 crore by 2015, with a total business of Rs 62,000 crore. The Nadar community-promoted bank is one of the fastest growing among the 17 small-sized banks in the country, albeit impacted by ownership issues. A K Jagannathan, managing director & CEO for the past two years, now having resigned and functioning more as a caretaker, talks about the charge to T E Narasimhan. Edited excerpts:
What factors contributed to 66 per cent growth in the fourth quarter?
Q4 witnessed strong growth in advances and accordingly the interest income rose 39 per cent. Also, the recovery from very old written-off accounts, about Rs 25 crore, has contributed to other income, which grew 34 per cent. Thus, profit after tax has increased to Rs 120 crore from Rs 72 crore, a 66 per cent quarter on quarter rise.
Will the growth momentum continue this year?
The bank has introduced a few strategies since last year for consistent growth. We have been lucky to grow right from April last year. In the previous year, however, most of the growth happened in the last quarter.
The bank continues to focus on rural and semi-urban centres for branch expansion and for business growth. We aim to add 50 branches this financial year, as was done last year. One regional office was recently set up in Bangalore and another one at Tiruchirappalli will be operationalised in May. The bank aims to surpass Rs 40,800 crore in business for FY 2012-13.
What is the overall business target by 2015?
To cross Rs 50,000 crore, with Rs 500 crore net profit. We expect total business to touch Rs 62,000 crore by 2015.
The growth drivers?
Though the bank is in the ‘old private sector’ category, it is on a par with new generation banks in offering a variety of products. The strength of the bank is rural and semi-urban centres, with retail assets. About 68 per cent of our loan portfolio is retail assets (below Rs 5 crore).
How do you plan to mobilise funds?
The bank’s philosophy for augmenting capital is only through internal accrual. The bank aims at one per cent of total business as net profit and increase in net interest income by 20 per cent every year. Thus, the bank can manage capital requirement till 2019 and beyond from internal accrual.
What is the status of the proposed IPO and the AGM?
There is an injunction by the Madras high court on conducting the annual general meeting. Once it is vacated, the AGM can be held and necessary action for an IPO taken.
What are your plans after TMB?
Post TMB, I am thinking of writing a book for knowledge dissemination among the younger bankers. I am moving over to Bangalore and on invitation, will be lecturing on banking and finance at banks and management colleges. In case an interesting assignment comes along, I am game. Age and experience can solve a few problems for some organisations/persons.
The TMB assignment was a manageable challenge. The bank has inherent strengths like execution excellence, dedicated staff, a congenial industrial relations climate, attractive compensation for the staff, etc.
Running a bank and growing it in a competitive market is the professional challenge. The bank has done extremely well on all dimensions — deposits, advances, branch expansion, ATM expansion, recovery in NPA accounts and written-off accounts, staff recruitment, growth in net profit, attractive dividends, etc.
Ticklish issues of share ownership, court cases and connected dimensions, yes, they are a challenge. Only time will resolve all these issues.