TMB Bank

TMB Bank Plc (TMB)
 

3Q12’s profit to grow 8%qoq due to NIM despite flat loan growth
We estimate TMB’s net profit in 3Q12 at B1.36bn, growing 8%qoq and
81.8%yoy although net loan growth in 3Q12 would not be as robust as
the sector’s, projected at only 1%qoq and 9.7%yoy, as a result of
repayment of corporate debtors that are state enterprises as well as
repayment of private debtors of financing loan. On the contrary, small
SME loans are growing impressively while medium SME loans have also
rebounded from deceleration. Consequently, overall, net loan in 9M12
would grow 6.9% from end-2011, in line with our target for FY2012 at
9%yoy. However, NIM in 3Q12 is projected to escalate by 10bp to
2.58% due to benefit from high yield loans for small and medium SME
issued in this quarter as well as a hike in yield as a result of the
deceleration of overall loans. At the same time, a slight increase in
funding cost would be offset by yield which has risen at a more
accelerated rate. In addition, fee income in this quarter is anticipated to
thrive by 3.9%qoq and 21.9%yoy, in line with FY2012’s target we have
projected at 15%yoy. Cost to income ratio is still stabilizing at 61.5%.
We believe the bank will not have to recognize unexpected expenses or
extraordinary income in this quarter. Additionally, debt provision would
remain close to that of the prior quarter at B950m (credit cost of 22bp
on average in this quarter) as NPL has been decreasing that the bank
needs not to make high provision. Overall, net profit in 9M12 would rise
to B3.65bn or the growth of 65.4%yoy, comprising 79.8% of our
FY2012’s net profit forecast.

Likely to revise forecast after earnings report. Profit in
2013 faces tax pressure
We are likely to revise our earnings forecast for 2012 after 3Q12’s
earnings report. We still foresee continuous growth in 4Q12 from 3Q12
due to improvement of the business in terms of NIM, fee income, and
cost control which will help boost net profit growth in the long run.
However, profit in 2013 tends to decline because the bank will have to
return to pay income tax as usual at a new rate of 20% as the tax
privilege from accumulative loss has expired.

Reiterate to hold, but new partner seeking makes the
stock attractive
We reiterate our recommendation of Hold for TMB as remaining upside is
quite limited. However, positive factors that will push up the share price
are an expectation for a new partner seeking (to replace the Finance
Ministry) as well as a positive development of the business that have
made TMB attractive for new investors. This is believed to help stimulate
short-term investment continuously.