TMB Bank

TMB Bank Plc

Q2 2013’s profit to shrink acutely qoq. Provision surges, loans might be very disappointing
We estimate 2Q13’s net profit at B1.03bn, contracting as much as 42.9%qoq
and 17.9%yoy mainly because debt provision expense is projected to surge
125.2%qoq and 168.2%yoy. Credit cost ratio is anticipated to rise to 218bp
from 98bp in the previous quarter due to an increase in coverage ratio
(LLR/NPL) from 123.9% at end-1Q13, correspondent to the BOT’s policy, not
an increase in NPL as concerned. However, there are still supporting factors in
this quarter as follows. 1) Net interest income is projected to grow
3%qoq and 20.9%yoy, in line with the net loan growth in 2Q13 which is
estimated at 1%qoq and 8.9%yoy. Nevertheless, overall net loan in 1H13
would grow only 1.3% from end-2012, still very low comparing to the bank’s
target and our estimation for FY2013 at 12%yoy. The lower-than-targeted
loan growth has resulted from repayment of corporate loans, which focus
mainly on short-term working capital loans. SME and retail loans have still
shown continuous growth, especially from medium and small SMEs (34% of
total loans). NIM in 2Q13 is anticipated to increase around 3bp to 2.83%.
Funding cost would drop slightly because the bank is not focusing on raising
long-term deposit like it did in the past. Meanwhile, loan yield would stabilize
from a decrease of low-yield corporate loans. 2) Fee income in 2Q13 is
anticipated to grow 4.2%qoq and 28.7%yoy, mainly from the growth of
corporate and SME loan-related income. 3) Other operating income is
projected to escalate 53.3%qoq and 80.6%yoy because the bank would
book an extraordinary income of B300m from a reversal of NPL provision that
had been transferred to TAMC. 4) Cost to income ratio in 2Q13 would
decline to 47.84% from 50.02% in the previous quarter. Although
operating expense in 2Q13 is anticipated to increase continuously mainly from
marketing expense for “TMB ME”, the more accelerated growth in the income
would benefit the cost to income ratio.
- Likely to cut 2013’s forecast after earnings declaration to reflect higher provision
We still maintain our earnings forecast for 2013-2014, but may cut 2013’s
forecast after 2Q13’s earnings declaration in order to reflect higher-thanexpected
debt provision and lower-than-expected 2013’s net loan growth.
- Reiterate to hold. During 2013’s FV review. Very limited upside
We reiterate our HOLD recommendation for TMB, but in the short term
investors should gradually sell. Although the share price has undergone
significant correction recently, TMB has risen as much as 32% since the
beginning of the year until present, the most among peers. Moreover, the
current share price has PBV of 1.7x, which is close to PBV of 1.8x of 2013’s
fair value (GGM, with long-term ROE forecast of 14%) before revision at
B2.40, so downside might be seen after a forecast cut.