Tisco Financial Group

Tisco Financial Group Plc (TISCO)

What’s new? TISCO’s net lending amounted to Bt219bn in August, up by 3.3% MoM, 21.4% YTD and 26.0% YoY. Its 8M12 net loan growth was slightly above the trend necessary for it to achieve our FY12 projection of 25% expansion. We expect TISCO to sustain lending momentum in September and beyond, as major automobile makers have ramped up production to meet strong consumer demand for new cars, boosted by the government’s first-time car buyer tax rebate scheme.
The end-August loans-to-deposits (plus borrowing) ratio stood at 110% at end-August, up from 107% a month earlier, due to the effect of a 23% MoM drop in outstanding B/Es. Note that at end-August, B/Es accounted for 20% of the total funding mix, down from 28% at end-July and 79% at YE11.
FY12 loan growth forecast has scope for upside:  Our 25% lending expansion projection for FY12 looks conservative, given TISCO’s annualized 8M12 lending growth rate of 26.0%. GDP growth, boosted by government stimulus spending, will provide further opportunities for the bank holding company to expand its corporate and SME lending (and fee income related to loans). 
SME-led growth: We expect TISCO to deliver better QoQ earnings for 3Q12, led by loan growth. In August, its corporate portfolio grew 4% MoM, followed by SME at 4.0% MoM and retail at 3.0% MoM. The scale of lending growth should mitigate the effect of rising funding costs. We expect a 3Q12 NIM of 3.2%, unchanged QoQ.  
Action: Strong lending and earnings growth should support TISCO’s share price. We aren’t concerned about its asset quality (its NPLs/loans ratio was 1.3% at end-August and it had a big loan loss cushion ratio of 171%). We rate the stock a BUY with a YE13 target price of Bt55, pegged to a PBV of 1.89x.