TMB Bank

TMB Bank Plc (TMB) 

TMB posted a 3Q12 profit of Bt1.44bn, up by 92% YoY and 14% QoQ. The result was in line with our estimate and the Bloomberg consensus. Pre-provision operating profit was Bt2.76bn, up by 6% YoY and 14% QoQ. 9M12 earnings grew 23% YoY to Bt3.7bn, which represents 72% of our FY12 forecast of Bt5.15bn.

Results highlights
Loans totaled Bt435bn at end-September 2012, up by 3.4% QoQ and 9.6% YTD (led by the SME and retail categories). Because of robust loan growth and good funding cost management, 3Q12 NIM rose 35 bps QoQ to 2.86% (we had modeled for a NIM of 2.6%). TMB’s net interest income jumped by 9% QoQ and18% YoY to Bt4.4bn.
The bank set loan loss provisions of Bt1.2bn for 3Q12, up 28% QoQ (but down 32% YoY). 3Q12 LLPs were 25% higher than our assumption. Thus, its loan loss coverage ratio increased to 83% at end-September from 79% at end-June. Fee income expanded by 10% YoY and 7% QoQ to Bt1.61bn, whereas OPEX was Bt3.4bn, up by 5% QoQ and 14% YoY. Thus, TMB’s cost/income ratio dipped to 55.4% in 3Q12 from 57.3% the previous quarter. Its NPLs/loans ratio declined to 5.44% at end-September from 5.58% at end-June.

Outlook
9M12 loan growth of 9.6% YTD is in-trend with our FY12 projection of 12%. We anticipate that TMB’s 4Q12 earnings will increase QoQ, driven by lending and a fatter NIM.
What’s changed?
Our FY12 earnings projection remains Bt5.15bn.We view that TMB has scope for earnings upside from a stronger NIM than modeled. Note that we forecast its FY12 NIM at 2.44%. 

Recommendation
Given ongoing lending growth, a rising NIM, expectations of declining loan loss provisioning in FY13 and a big CAR of 18.9%, TMB’s bottom-line profile is good (and there is scope for upside from stronger lending and a NIM expansion in FY13). Thus, its share price should rise somewhat. The stock currently trades at a YE13 PBV of 1.28x (below the sector mean of
1.6x). We maintain our TRADING BUY rating with a YE13 target price of Bt2, pegged to a PBV of 1.46x