TISCO Financial Group

4Q12 profit was 6% below our number Sector: Bank Overweight Rating: BUY Target Price: Bt58.00 Price (11 January 2013): Bt54.25 Price chart 4Q12 earnings missed our forecast by 6%

TISCO posted 4Q12 earnings of Bt996m, up by 47% YoY and 4% QoQ. The result fell 6.1percent short of our estimate and 4.8% below the Bloomberg consensus, attributable to bigger loan loss provisions than modeled. Pre-provision operating profit (PPOP) rose by 33% YoY and 26% QoQ to Bt2.1bn. FY12 earnings increased 13% YoY to Bt3.7bn, equal to 98% of our projection for the year.

Result highlight

Lending grew by 8.8% QoQ and 34.4% YoY—exceeding our estimate of 5.5% QoQ—driven by the retail (up 8.3% QoQ) and SME (up 22.3% QoQ) portfolios (corporate loans rose 4.0%). TISCO's 4Q12 NIM was 2.81% (slightly below our estimate of 2.93%), down 19 bps QoQ. Although HP lending growth was strong (especially in December, boosted by the first-time car buyer scheme), intensified competition for business meant that its lending yield dipped QoQ in 4Q12.

Furthermore, TISCO set heavy loan loss provisions of Bt533m for the quarter, up 72% YoY (but flat QoQ), which reflects strong loan growth. Note that we expected the bank holding company to set LLPs of Bt221m. Its NPLs/loans ratio stood at 1.2% at YE12, unchanged QoQ.

Outlook

We expect TISCO to report further strong HP lending growth in 1H13, driven by the government's first-time car buyer tax rebate program (the deadline for qualifying car orders was YE12, but the delivery deadline is June 30, 2013). In addition to HP business, TISCO will expand other high-yield operations this year, especially its SME portfolio. Thus, we expect a good FY13 performance. We forecast 17% loan growth this year (management guides for only 15%).

What's changed?

Our FY13 earnings forecast stands unchanged at Bt4.6bn for the moment.

Recommendation

TISCO's business growth profile has scope for upside from stronger lending than modeled (which could enhance its FY13 NIM). We expect the bank holding company to post further lending and earnings growth in 1Q13 and beyond. We have a BUY call with a YE13 target price of Bt58.