TMB plans to grow CASA to 35% in 3 years by expanding presence

Tamilnad Commercial Bank (TMB) It plans to increase the proportion of low-cost current and savings accounts (CASA) in total deposits to about 35 percent in three years or so from the current ratio of 29 percent by expanding the branch network in northern states such as Uttar Pradesh and in the north-east of the country .

Within the total deposits of Rs. 47,766 crore, the CASA deposits of the Thoothukudi-based bank amounted to Rs. 13,736 crore at the end of March 2023.

High deposits in checking and savings accounts help banks reduce the cost of deposits and improve the spread (the interest rate on loans minus the interest rate paid on deposits).

The bank, established in 1921, has a regional focus in South India, in particular. Of the total 530 branches, 386 are located in Tamil Nadu. The bank now wants to diversify into other high-growth regions of the country.

Geographical strategy

Krishnan, Managing Director & CEO, notes that as part of its geographic diversification strategy, TMB has started opening a branch in North East (Guwahati, Assam) recently.

He stressed that when the bank expands its network this year (2023-24), it will focus on other countries in which it does not have a presence and in which there are good business potential.

Undoubtedly, CASA is 29 percent lower. But…if you do the analysis (of the banking industry), it will be mostly (CASA deposits) from belts like the North East and states like Uttar Pradesh…that’s where it comes from. So, that’s another reason to expand.

“So, going forward, we’ll expand in those places where we have good CASA potential… As a conservative tip to the street, we’ll take CASA to 35 percent in another 3 years or so,” Krishnan said the analysts. He said the bank plans to open about 50 branches in FY24.

Technology investments

On the technology front, the bank is likely to invest around Rs 200 crore to Rs 250 crore over a period of three years.

“On the technology/digital front, we are in a catching-up mode. We need to catch up, and that’s a statement of fact. But there is enough business in the market. It’s not just that the banks that have already acquired the technology are able to Getting the business… There is enough market available.

drives growth

The Bank expects advances to grow by 12-15 percent in FY24, with continued focus on the RAM segment (retail, agricultural, micro, and small and medium enterprises).

In FY23, total advances grew by 11 per cent YoY (YoY) to ₹37,582 crore. RAM advances accounted for 87 percent of the total advances, with the remaining balance accounted for through corporate advances.

“The mix (87:13 RAM: corporate predecessor) may vary a little bit here and there, but the focus will continue to be on the RAM segment where we have quite a diversified risk — there is no concentration risk, and this is an area where the nuances are known to the bank,” Krishnan said.

The old generation private sector bank plans to gradually change the mix of advances.

In this regard, the TMB head saw that the bank may start with medium-sized companies where it may take exposure of, say, Rs. 100 crore to Rs. 300 crore instead of going to large companies with, say, Rs. 1,000 crore or so.

So, we’re going to slowly grow from (RAM) to mid-cap and then to large corporations as well. This will be one of the paths we will adopt. And at the same time…we’re very careful about good companies as well where we feel comfortable, where we understand the business, and where it fits with the bank’s policies.