Tamilnad Mercantile Bank Q4 FY26 profit up 28% on NIM

Tamilnad Mercantile Bank (TMB) reported a strong March-quarter performance for FY2025-26, with profit growth supported by higher net interest income and an improvement in net interest margin. The bank also reported better asset quality in the quarter, with the gross NPA ratio moving lower both sequentially and year-on-year.

Management said the latest quarter marked a shift where the core banking engine of deposit mobilisation and lending contributed more meaningfully to profitability. The bank’s disclosed numbers also point to healthy momentum in deposits, while advances growth remained strong.

Q4 FY26 profit rises on core income strength

TMB reported net profit of ₹373.65 crore in the last quarter of FY2025-26, up 28% from ₹291.90 crore in the same quarter of the previous fiscal. The bank attributed the improvement to expansion in net interest margin and stronger performance from core banking activities.

Salee S Nair, Managing Director and CEO, said the bank is seeing the core business of deposit-taking and lending drive profitability. In the same context, the bank highlighted growth in net interest income as a key driver in the quarter.

The performance comes at a time when investors have been closely tracking how banks are managing spreads, deposit pricing, and asset quality as the system competes for liabilities.

Net interest income jumps 24% YoY

The bank’s core net interest income rose 24.04% year-on-year to ₹704.45 crore in Q4 FY26, compared with ₹567.92 crore in the corresponding quarter a year ago. This increase reflects stronger earnings from the loan book relative to interest costs.

Management explicitly linked the profit outcome to the core businesses of deposits and lending. This emphasis matters for investors because a profit rise backed by core income is typically more repeatable than one driven mainly by one-off items.

The bank’s quarterly commentary also pointed to advances growth of over 20% during the period.

NIM improves to 4.18% in the March quarter

TMB reported net interest margin (NIM) of 4.18% in Q4 FY26. This was higher than 4.04% in the preceding quarter, and also above 3.91% in the year-ago period.

A rising NIM indicates the bank was able to widen spreads between yields on earning assets and the cost of funds during the quarter. In a competitive deposit market, incremental NIM improvement can be closely tied to how effectively a bank manages deposit mix, loan yields, and funding costs.

The bank also indicated it is targeting to maintain advances growth in FY27.

Deposits rise nearly 15% YoY; bank targets 16%

Deposits increased 14.94% year-on-year to ₹61,712 crore in the January-March quarter, up from ₹53,689 crore in the same quarter a year ago. Management said it is targeting to accelerate deposit growth by one percentage point to 16%.

Deposit growth is especially important because it supports loan expansion without forcing higher reliance on wholesale funding. It also influences the bank’s cost of funds, which in turn affects NIM.

The bank’s update also noted that, on a sequential basis for the fourth quarter, deposits rose 8.83%.

Asset quality improves; GNPA ratio falls to 0.73%

TMB reported a sharp improvement in asset quality in Q4 FY26. The gross non-performing assets (GNPA) ratio came in at 0.73%, compared with 0.91% in Q3 FY26 and 1.25% in the year-ago period.

This trend suggests lower slippages or improved recoveries, or a combination of both, though the bank’s update specifically highlighted the ratio movement rather than a detailed breakdown. For a lender, a lower GNPA ratio typically reduces pressure on provisioning and supports profitability.

The bank also said it sees limited direct risk from ongoing West Asia tensions, citing relatively small exposure to the region.

Provisional FY26 update: business growth stays positive

TMB released provisional financial results for the quarter and fiscal year ending March 31, 2026, noting strong year-on-year and quarter-on-quarter growth. On a sequential basis for the fourth quarter, total business increased by 7.09%.

Within this, advances rose 5.16% and deposits increased 8.83% quarter-on-quarter. The bank noted these figures are provisional and subject to final audit by its Statutory Central Auditors.

Key reported metrics at a glance

FY25 numbers provide context on the profit trajectory

Separately, the broader set of figures included in the provided material shows TMB reported record full-year net profit of ₹1,182.6 crore in FY25, up 10.3% from ₹1,072.0 crore in FY24. Total income for FY25 was reported at ₹6,141.75 crore, up 11.81% year-on-year.

For Q4 ending March 2025, the bank reported net profit of ₹291.90 crore on total income of ₹1,542.06 crore, with NIM at 3.87% in that quarter. Operating profit for Q4 FY25 was reported at ₹403.98 crore.

These older-period numbers help frame how the bank’s core income and margins have progressed into the FY26 March quarter, particularly with the reported NIM rising to 4.18% in Q4 FY26.

Market impact and what investors will watch

From a market lens, the combination of higher NIM, higher core net interest income, and lower GNPA ratio is the key takeaway from the Q4 FY26 update. Deposit growth and management’s stated target of 16% deposit growth will also remain in focus, given the role deposits play in funding advances and supporting margins.

In the near term, investors typically track whether the bank can sustain advances growth in FY27, as indicated by management, while maintaining asset quality at the improved levels reported for Q4 FY26.

Conclusion

Tamilnad Mercantile Bank’s Q4 FY26 performance was led by a 28% rise in net profit to ₹373.65 crore, supported by a 24.04% jump in core net interest income and an improvement in NIM to 4.18%. The quarter also showed better asset quality, with GNPA at 0.73%, and deposits rising to ₹61,712 crore. The bank has said its Q4 and FY26 figures are provisional and subject to final audit, and investors will watch for the audited disclosures and the bank’s execution on FY27 growth targets.