Unusual contraction in January loan growth. TISCO, as usual, was the first bank to release January balance sheet and this revealed a MoM contraction of 0.11%, a rare occurrence for TISCO. This is the first sign that loan growth prospects are in trouble and could be indicative of what we can expect in the sector as a whole.
Liquidity draining out. TISCO’s deposits and borrowing fell 4% MoM in January. Its interbank assets, which represent excess liquidity, were drained by approximately the same amount. We believe this reflects two things. Firstly, TISCO may be seeing weak loan demand this year, or secondly, this may be part of its effort to enhance NIM.
Maintain Buy on undervalued position. We maintain Buy on TISCO, as we believe the current share price overplays the potential slowdown in loan growth and deterioration in asset quality. At the same time, its January balance sheet suggests a downside risk to loan growth forecast.