TISCO Financial Group

 

 

 

 

 

3Q12 earnings in line with estimate: TISCO posted 3Q12 earnings of Bt952m, up by 6% YoY and 4% QoQ. The result was 1.8% below our estimate, but 3.54% above the Bloomberg consensus. Pre-provision operating profit (PPOP) rose by 7% YoY and 2% QoQ to Bt1.64bn. 9M12 earnings increased by 5% YoY to Bt2.7bn, which represents 72% of our FY12 projection.  

Results highlights: Lending grew by 8.7% QoQ and 23.3% YTD—exceeding our estimate of 7.5% QoQ—driven by the retail (up 9.2% QoQ) and SME (up 14.6% QoQ) portfolios (corporate loans rose 5.2%). TISCO’s 3Q12 NIM was 3.01% (in line with our estimate), down 18 bps QoQ. Intensified competition for deposit mobilization meant that TISCO’s funding costs rose faster than its lending yield in 3Q12. The bank holding company set heavy loan loss provisions of Bt532m for the quarter, up 76% YoY (but down 10% QoQ), which reflects strong loan growth. Its NPLs/loans ratio dipped to 1.2% at end-September from 1.3% at end-June. 

Outlook: We expect TISCO to sustain its 4Q12 NIM QoQ through lending expansion. It will continue to aggressively mobilize funding in order to accommodate strong loan growth, so funding costs will remain high for the quarter. We anticipate that its LLPs will remain at the current subdued level. Given strong lending growth, a sustainable NIM and a seasonal surge in car sales and credit card spending, we anticipate that its 4Q12 profit will rise slightly QoQ.

What’s changed? Our FY12 earnings forecast stands unchanged at Bt3.77bn for the moment. The 9M12 bottom-line represents 72% of our full-year projection.

Recommendation: Given its strong YTD loan growth performance of 33.3% and well-managed asset quality (an NPLs/loans ratio of 1.2%), we expect TISCO to post further lending and earnings growth in 4Q12 and FY13. We have a BUY call on the stock with a YE13 target price of Bt58.