TMB Bank

TMB Bank Plc (TMB)
Q2 2012 earnings met our number: TMB posted a 2Q12 profit of Bt1.26bn, up by 6% YoY and 22% QoQ. The result was in line with our estimate. Pre-provision operating profit was Bt2.4bn, up by 30% YoY and 6% QoQ. 1H12 earnings represent 48% of our old FY12 forecast of Bt4.8bn.
Results highlights: Loans totaled Bt421bn at end-June 2012, up by 5.1% QoQ and up 6.0% YoY (led by the SME portfolio). Because of robust loan growth and good funding cost management, 2Q12 NIM rose by 12 bps QoQ to 2.51% (we had modeled for 2.4%). TMB’s net interest income grew only 3% QoQ to Bt4.1bn.
The bank set loan loss provisions of Bt932m for 2Q12, up 74% YoY (but down 25% QoQ). Thus, its loan loss coverage ratio increased to 79% at end-June from 74% at end-March. Fee income expanded by 12% YoY and 10% QoQ to Bt1.51bn, whereas OPEX was Bt3.25bn, up by 1% QoQ and 3% YoY. Thus, TMB’s cost/income ratio dipped to 57.3% in 2Q12 from 58.3% the previous quarter. Its NPLs/loans ratio declined slightly to 5.58% at end-June from 5.84% at end-March.
Outlook: Strong 1H12 loan growth of 6% YTD prompted us to raise our FY12-13 projections for lending expansion from 7% and 6.5%, respectively, to 10% and 8%. We anticipate that TMB’s 2H12 earnings will increase HoH, driven by loan growth and a fatter NIM.
What’s changed? Because of our expanded expectations for lending growth, we have upgraded our FY12-13 earnings forecasts by 4.2% and 6.8%, respectively, to Bt5bn and Bt6.3bn.   
Recommendation: TMB’s 2H12 bottom-line profile is good (and there is scope for upside), led by sustained lending growth, a rising NIM, declining LLPs and a big CAR of 18.72%. As such, we have upgraded our rating from SELL to HOLD with a new YE12 target price of Bt1.60, pegged to a PBV of 1.26x (TMB is too close to our target price to justify a BUY rating).The stock currently trades at a YE12 PBV of 1.20x, below its long-term mean of 1.34x. ...
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