S&P not impressed with drop in TMB's non-performing loans
Play
TMB Bank showed a sharp decline in non-performing loans in the fourth quarter of last year, but Standard & Poor's Ratings Services noted that this may not reflect a sustained improvement in asset quality of the bank.
"We attribute the steep drop in NPLs in the last quarter of 2012 to a one-time sale of such loans... We expect the bank's capitalisation levels to remain at moderate levels despite lower profits last year. TMB's pre-provision performance has strengthened because of increased margins...TMB intends to accelerate loan growth this year, which we believe could increase the risk of NPLs. The bank aims to focus on small and mid-size enterprises, which we view as a high-risk segment. Sustained improvement in TMB's risk management practices and execution of its business strategy would underpin the rating," the rating agency said.
In 2012, TMB sold off Bt5.7 billion in NPLs, reducing the NPL ratio to 4.1 per cent at the end of last year from 5.44 per cent from Sept 30, 2012. Moreover, the bank made a huge one-time provision of Bt5.3 billion, leading to financial losses for the quarter. On a full-year basis, the bank made a marginal profit.
The bank's reported margins rose to 2.73 per cent for fiscal 2012, compared with 2.41 per cent in the previous year. TMB's cost-to-income ratio also continued to improve.
