Thai Military Bank
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Loan growth beats peers. NIM on uptrend
Thai Military Bank Plc (TMB)
- 8M14 net loan growth hits 6.21% YTD
Net loan (after allowance for doubtful account) at end-August 2014 was
B496bn, increasing 0.7%mom and 13.14%yoy. Year-to-date net loan
growth is 6.21%, very high when compared with FY2014 target we estimate
at 8%yoy, driven mainly by factoring loans which may receive repayment in
the rest of the year. SME loans have shown good growth since the
beginning of the year, especially the medium-sized. Total deposit at end-
August 2014 was B573bn, rising slightly from the prior month. However,
year-to-date growth in deposit is 8.27%, mainly from a flow of deposit from
other banks to TMB since it has provided a higher interest rate.
Consequently, the bank started to slow down deposit raising by gradually
cutting its fixed deposit rate (mostly for one-year deposit) in order to
increase loan to deposit ratio (LDR) to over 90% again. As a result, LDR at
end-August 2014 could stand above 90% again after dropping to 89.9% at
end-1H14.
- NIM uptrend benefits normalized profit in 3Q14
We project FY2014-2015 net profit to recover significantly by 47.7%yoy and
22.0%yoy, exceeding the sector’s average growth we estimate at 8.1%yoy
and 13.3%yoy. Normalized profit in 3Q14 would show continued growth
from the previous quarter since net interest margin (NIM) has been in an
uptrend for the third consecutive quarter because of the aforementioned
decreasing funding cost. TMB has been with numerous positive factors, i.e.
net loan growth, NIM uptrend, fee income, effective operating expense
control (cost to income ratio), asset quality control (NPL dropped to 3% of
total loans (separate financial statement); NPL coverage ratio is not lower
than 130-140%), and ROE target of 14% in 2014 and 15% in 2015.
- 2014 fair value is B3.40
We recommend buying TMB and select it as a top pick of the sector. The
current share price has a total upside of 13.62% from 2014 fair value of
B3.40, based on PBV of 2.19x, GGM, ROE forecast of 14.50% and LT growth
of 9%.
