Tamilnad Mercantile Bank stock rallies 7.6%; Here's why

Shares of Tamilnad Mercantile Bank rose 7.6% to ₹548.50 apiece on the NSE during early trade on Thursday after the bank has been authorised by the Reserve Bank of India (RBI) to undertake government business on behalf of the banking regulator.

An agreement in this connection was signed by the bank with RBI in Mumbai for appointing TMB as an 'agency bank' of RBI to undertake government agency business.

The stock of the private sector bank opened strongly during the trade at ₹518.50 apiece compared to the previous closing price of ₹509.90 and continued to rise, hitting an intraday high of ₹548.50. At 01:00 p.m., the stock was trading at around ₹528.75, up by ₹19 or 3.73% on the NSE.

The stock was recently listed on the bourses on September 15, 2022. The bank had mopped up ₹831.6 crore through its IPO. The public offer has received a healthy response from investors, as it was subscribed to nearly 2.86 times.

The stock, however, made a muted market debut at ₹495 apiece, a discount of nearly 3% against its issue price of ₹510. Later, it ended flat at ₹509.65 on the first day.

For the September quarter, the bank reported a 37.38 percent rise in its standalone net profit at ₹262 crore, compared to ₹190.7 crore in the year-ago quarter.

The revenue of the bank during the second quarter stood at ₹1,141 crore as against ₹1,101 crore in the corresponding quarter of the previous year.

The bank's interest income grew to ₹997 crore during the quarter as against ₹950 crore in the similar quarter of last fiscal. The net interest margin of the bank stood at 4.47 percent, while the provision coverage ratio increased to 88.58 percent.

On the asset quality side, the gross NPAs of the bank declined 43.25 percent to ₹593 crore from ₹1,045 crore in the year-ago quarter, while the net NPA dropped 47.61 percent to ₹296 crore from ₹565 in the corresponding period of previous year.

Tamilnad Mercantile Bank is one of the oldest private sector banks in the country with a history of almost 100 years. It offers a wide range of banking and financial services primarily to Micro, Small and Medium Enterprises (MSMEs), agricultural and retail customers.

As of March 2022, the bank has 509 branches, of which, 106 branches are in rural, 247 in semi-urban, 80 in urban and 76 in metropolitan centres. It had a customer base of around 5.08 million as of March 2022. Of these, nearly 80 percent comprised customers who were associated with the bank for more than five years.

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