The Kumbakonam-based bank offers loans to the MSME (micro, small and medium-sized businesses), retail, wholesale and agriculture segments. Bank progress rose 15% to 50,409 crore, while deposits rose 11% year-on-year to 58,271 crore at the end of December 2024. The bank’s activities are concentrated in Tamil Nadu, where Tamil Nadu has 65% or 533 of the total 822 branches in the country, donating 73% to its business. Banks are expanding elsewhere, reducing branch concentrations in Tamil Nadu from 69% four years ago.
Apart from regional concentration, another weakness of the bank is that, as of December 2024, the CASA concentration in total deposits was 27.7%. This increases the cost of funds. Bank funding costs increased from 3.9% as of March 2024 to 4.8% as of December 2024, while net interest (NIM) has shrunk from 4% to 3.6%. Bank provisioning coverage ratio for the December quarter increased to 77% from 71% in the previous year.
Although the Total Non-Performing Assets (GNPA) ratio appears to be rising, banks have been gradually improving their asset quality since the June quarter 2023. Its GNPA fell from 4.5% in the December quarter to 3.4% from 4.9% in June 2023.
The bank reported double-digit revenue and profit growth in the December quarter over the previous year. Net interest income rose 14% to 587.7 crore, while net profit rose 13% to 286 crore.
In November 2024, credit rating agency ICRA revised the bank’s outlook from “stable” to “positive.” A recent report cited the expectations that asset quality, solvency and profitability will be pleasant in the short term. To take shape,” the broker said. The stock’s target price was revised from the previous £188 to £205, meaning its target price book is 1.4.
