TISCO Financial Group

TISCO Financial Group Plc (TISCO) 

 

Profit in 4Q15 was 13% over our numbers

TISCO reported 4Q15 earnings of Bt1.24bn, rising both 1% YoY and 54% QoQ. The result was 13% above our number but 5% over the Bloomberg consensus. This was attributable to expanded extra income from debt collection fees and fees from business promotion on HP. However, its pre-provision operating profit (PPOP) was Bt2.8bn, up 14% YoY, consistent with our forecast. Its FY15 profit comprises 103% of our FY15 forecast of Bt4.1bn.

Results highlights

Lending inched up 0.4% QoQ (down 9.3% YoY against our FY15 loan contraction forecast of 10%). Disaggregated by category, retail loans (such as HP loans for automobiles and motorcycles) rose 0.4% QoQ, and corporate loans grew 1.1% QoQ. However, SME lending fell 1.1% QoQ, due to declining activities on car dealers and loan repayments. However, its 4Q15 NIM jumped 15 bps QoQ and 83 bps YoY to 3.88%, attributable to the fact that the cost of funds declined faster than lending rates YoY.

TISCO set loan-loss provisioning (LLP) at Bt896m for 4Q15, a rise of 2% YoY but a drop of 59% QoQ, which reflects better risk management against economic uncertainty. Its 4Q15 LLP setting was 10% over our estimate of Bt790m. Its stated NPL/loan ratio slid 3.2% at YE15 from 3.3% three months earlier due to conservative lending policy. The loan-loss-coverage ratio rose to 80% at YE15 from 74% three months earlier. TISCO’s 4Q15 fee income grew 8% YoY and 4% QoQ to Bt1.33bn from banking fees, mutual fund and bancassurance. Note that its other income jumped 31% to Bt438m in 4Q15, driven by debt collection and promotion fees on HP loans.

Outlook

We have maintained our loan growth figure of 3% for TISCO in FY16. We also now expect 1Q16 earnings to climb YoY and QoQ, driven by lower LLP setting, rising retail loans and improved NIM.

What’s changed?

We maintain our FY16 earnings forecast of Bt4.5bn. 

Recommendation 

We expect that its corporate and personal loans should show gains from 1Q16 onward, assuming that private investment starts to pick up early this year. That would open space for a lending recovery in FY16 from the lending contraction of 9.3% last year. We also anticipate TISCO’s LLP to decline in FY16 by at least 30%. Given the better business outlook, cheap valuation and better asset quality management, we have raised TISCO’s target price to Bt46.50 pegged to a PBV of 1.2x (VS mean of 1.45x). Our TRADING BUY rating stands.