TMB Bank

TMB Bank Plc (TMB)

3Q12’s profit grows 13.6%qoq. Loan and NIM are better than expected
TMB announced net profit in 3Q12 at B1.43bn, beating expectation by
growing 13.6%qoq and 91.5%yoy mainly from the core business. 1) Net
interest income has thrived 9.1%qoq and 18%yoy – substantially
better than expected due to benefit from the net loan growth of 3.4%qoq
especially for high yield loans including small SMEs and retails. The portion of
these 2 types of loan has increased to 51% from 48% of total loans at end-
3Q12 (overall, net loan in 9M12 has grown 9.3% from end-2011, already
equal to our target for FY2012). At the same time, funding cost was quite
stable. TMB could increase the portion of low cost deposit (CASA) to 63.4%
at end-3Q12 from 60.2% at end-2011, making NIM increase by 27bp to
2.75% in this quarter. 2) Cost to income ratio has decreased to only
57.5% in this quarter from 61.1% in 2Q12 – better than expected.
Cost of operation in 3Q12 rose only 3%qoq and 13%yoy mainly from
substantial declines in other cost despite increasing staff expense and an
expense on continuous impairment of non-performing assets and other
assets. However, a negative factor to pressure net profit in this quarter was a
28.2%qoq increase in debt provision, which was higher than our projection
although NPL in this quarter has shown flat growth. Moreover, compared with
total loan at end-3Q12 which has decreased to only 5.06% from 5.17% at
end-2Q12, coverage ratio (LLR/NPL) has hiked to 85.4% at end-3Q12 from
81.5% at end-2Q12. Overall, net profit in 9M12 increased to B3.73bn,
rallying 68.7%yoy and comprising 81% of our previous FY2012’s net profit
forecast.

Up 2012-2013’s forecast to reflect NIM underestimation
We revise up our earnings forecast for 2012 and 2013 by 6.2% and 19%
respectively in order to reflect our previous underestimation of NIM. Net loan
growth forecast for 2012 is raised slightly to 10%yoy as the bank’s NPL
selling plan in 4Q12 is still possible. Consequently, earnings in FY2012 are
projected to grow by 21.4%yoy. However, for FY2013 the earnings are
anticipated to stay flat from 2012 (from our previous forecast for a 10.3%yoy
contraction) due to an effect from increasing tax expense after the bank has
to return to pay tax at a normal rate of 20% after the BOI privilege from
accumulated loss expired.

Reiterate to hold, but new partner seeking still makes the stock attractive
We reiterate our recommendation of Hold for TMB as its remaining upside is
still limited compared with the new 2013’s fair value of B1.78 at 1.32x PBV.
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.