Tisco Bank (TISCO): 3QFY17 profit up 25.8% y-y and 4.5% q-q October 16, 2017

3QFY17 profit up 25.8% y‐y and 4.5% q‐q but slightly short of forecasts: TISCO notched up a 3QFY17 net profit of Bt1.6bn, up 25.8% y‐y and 4.5% q‐q but the quarterly profit fell slightly short of forecasts on higher‐than expected loan‐loss provisions. Burgeoning non‐interest income, notably fee, dividend and bancassurance income was a key contributor to the profit growth in this period.

3QFY17 loans down 0.5% q‐q, NPLs also down: TISCO reported its loan book shrank further by 0.5% q‐q in 3QFY17, taking its YTD loan contraction to 4.3% from end‐FY16. Retail and SME loans continued to be the main culprit behind the shrinking loan book in this period. However, NPLs also followed loans lower to a mere 2.34% of total loans in this period from 2.41% in the previous quarter but loan‐loss provisions were higher than the levels seen in the prior quarter as a result of its efforts to boost its NPL coverage ratio higher to 186% in this period from 172% in the previous quarter.

FY17 profit view unchanged, rating lowered to ‘NEUTRAL’ with Bt84/share target price: For now, we keep our FY17 profit outlook for TISCO unchanged at Bt6.5bn, up 30% y‐y on expectations that contribution from the recently completed transfer of the retail banking business from Standard Chartered Bank’s Thai unit (SCBT), which will start coming in 4QFY17 will give its revenue and profit an additional boost though 9MFY17 profit accounted for only 70% of the full‐year forecast. At current prices, we downgrade TISCO shares from ‘ACCUMULATE’ to ‘NEUTRAL’ with a FY18 target price of Bt84/share.

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