TISCO Financial Group
Q2 2013 profit in line with our expectation
TISCO Financial Group Plc (TISCO)
2Q13 numbers largely as expected
TISCO announced 2Q13 earnings of Bt1.16bn, up 26% YoY and flat QoQ. The result was in line with our number, but 5% above the Bloomberg consensus. Pre-provision operating profit (PPOP) rose 32% YoY but dipped 2% QoQ to Bt2.1bn. 1H13 earnings jumped 32% to Bt2.3bn, which represents 48% of our FY13 forecast of Bt4.8bn.
Results highlights
Lending grew by 5.2% QoQ and 33.9% YoY—exceeding our estimate of 4.5% QoQ. Disaggregated by category, retail loans rose by 4.2% QoQ, SME by 10.0% QoQ and corporate by 6.4% QoQ. The 2Q13 NIM was 2.90% (in line with our estimate of 2.90%), up 2 bps QoQ. The fatter NIM was due to lending growth.
TISCO set big loan loss provisions of Bt810m for the quarter, down 14% QoQ (it set counter-cyclical provisions in 1Q13), but up 38% YoY, which to some extent reflects swift loan expansion. But we had expected the bank holding company to set LLPs of only Bt600m. Its NPLs/loans ratio inched up to 1.45% at end-June from 1.28% at end-March. The loan loss coverage ratio declined to 145.3% at end-June from 167% at end-March 2013, due to bad debt write-offs. Note that 2Q13 fee income jumped 38% YoY to Bt1.3bn (we had assumed only 20% YoY growth), which fully offset the effect of bigger LLPs than modeled.
Outlook
We expect TISCO to report normalized HP lending growth in 3Q13, driven by HP for used cars and personal loans using cars as collateral. Furthermore, other high-yield loan operations will expand this year, especially mini/micro SME lending (corporate lending is also targeted for stronger growth). Thus, we expect a good FY13 performance. We assume 22% loan growth for the year (in a show of false modesty, TISCO guides for only about 15%).
What’s changed?
Our model indicates FY13 earnings of Bt4.8bn. As noted above, 1H13 profit represents 48% of our full-year forecast.
Recommendation
TISCO justifies a BUY rating, based on our projections for loan growth and earnings. There is also scope for upside from stronger lending than modeled (which could enhance its 2H13 NIM) and greater fee income growth than assumed (partly from the securities business). We expect the bank holding company to set new records for loans and earnings for 3Q13 and beyond.
