4Q13A below estimates. 4Q13A net profit decreased 19% YoY and 29% QoQ to
Bt804mn, below our forecast of Bt1.184bn. There was a negative surprise in the
area of NPLs and provisions, which was offset partly by lower opex than
1. Loan growth: In line with expectations, +2.6% QoQ, +18% YoY. 4Q13 loan
growth came primarily from corporate loans with a small rise in auto loans.
2. Net interest margin: Worse than expected, -14 bps to 2.6%. Yield on earning
assets fell 14 bps QoQ as a result of a higher proportion of corporate loans.
Cost of funds was stable QoQ.
3. Non-interest income: Slightly better than estimated, +6 QoQ, mainly driven by
gain on investment and foreign exchange.
4. Cost to income: Substantially better than anticipated, falling to 19.1% (lower
than usual) from 38.5% in 3Q13. There was an unusual 38% QoQ reduction in
personnel expenses that indicates TISCO’s cost tightening policy.
5. Asset quality: Worse than expected: NPLs surged 18% QoQ, pushing NPL ratio
up to 1.7% from 1.47% in 3Q13, mainly used car hire-purchase loans. Provision
expense doubled QoQ, bringing full-year credit cost to 1.42%, well above the
guidance of 1.2%. LLR coverage shrank to 128% from 136% at 3Q13.
Maintain Buy. We maintain Buy on TISCO, seeing it as undervalued at this point.
We believe the current share price already reflects the potential slowdown in loan
growth and its deterioration in asset quality. There is upside risk from a further cut
in the policy rate as the central bank tries to cope with the slowing economy,
which is beginning to feel the pain of the political unrest. Our earnings forecast
and target price are under review pending the analyst meeting on January 15.