TISCO - Still spring-cleaning (TP Bt98.0, NEUTRAL (from OUTPERFORM))
(19/04/2018 - 08:50)
กลุ่มอุตสาหกรรม ธนาคาร
หุ้น TISCO
มูลค่าพื้นฐาน 98.00
คำแนะนำ HOLD
  • Expect better NPL coverage and lower OPEX after TISCO sells personal and credit card loan portfolios in 2Q-3Q 2018
  • 1Q18 profit grew 18% yoy due to strong NIM and non-NII growth; operations should return to normal from 2Q18
  • Downgrade to NEUTRAL, Bt98 TP implies 2.0x P/BV, 11x FY18F P/E and 6.4% dividend yield; prefer KKP for HP-focused banks

 

      Plans to transfer unsecured loans to Citibank in 2Q-3Q18

At the analyst briefing yesterday, TISCO revealed plans to sell personal and credit card loans in 2Q-3Q at zero gain/loss. However, NPL coverage would improve slightly due to lower gross NPLs and stable LLR. At end 1Q18, its credit card and personal loan portfolios accounted for 2.3% of loan book. Following the transfer, we expect slower top line growth but lower OPEX and credit cost should help TISCO to maintain strong earnings momentum. TISCO would have to pay Bt60m per quarter to hire SCBT to operate its credit card business this year. Meanwhile, to reflect one-off items in 1Q18, we cut FY18F loan growth (to -1% from +1%) and revised up non-NII growth and NIM on good cost control, which should offset lower loan yield. We also revised up credit cost and OPEX. After fine-tuning assumptions, we nudged down FY18F/19F earnings by 1% each.

 

Growing auto cash loan to offset shrinking mortgage loans

TISCO reported Bt1.8bn net profit for 1Q18, up 18% yoy, in line with our estimate. There were one-off items in 1Q18: Bt250m gain on investment and Bt150m increase in associate contribution. On the cost side, the bank booked Bt200m refinancing cost and Bt300m provision for NPL write-off. Excluding these, core earnings grew 24% yoy to Bt1.85bn. Looking forward, TISCO will focus on growing auto cash loan (+4% YTD-Mar) to keep NIM high. Given 13-15% loan yield and 2% credit cost, TISCO would generate the highest risk-adjusted return from auto cash loans compared to other loans. After writing-off NPL for unsecured loans in 1Q18, credit cost should return to normal (1.0%) from 2Q18 onwards.

 

Downgrade to Neutral, switch to KKP for better risk-reward profile

We like TISCO for offering strong NIM and asset quality. However, the recent strong share price performance suggests the good news has been priced in. Key risk is intense competition in HP and mortgage business, which would derail its loan growth. We recommend switching to KKP for offering better risk-reward profile.